WSJ:WORLD FOREX: Euro Recoups Losses; France, Spain Bond Auctions Eyed
-- Euro recoups earlier losses as investors lock in profits
-- Euro fell earlier to one-month lows versus dollar, yen following Fitch report
-- Focus now on France, Spain bond auctions later in day
By Kosaku Narioka
Of DOW JONES NEWSWIRES
TOKYO -(Dow Jones)- The euro recouped earlier losses Thursday in Asia as macro-focused hedge funds and other investors locked in profits from the single currency's falls to fresh one-month lows versus the dollar and the yen, ahead of closely watched bond auctions in Spain and France later in the day.
The euro and other relatively risky assets fell earlier in the day following a Fitch Ratings Service report indicating that the threat of contagion spreading from the most indebted European countries to the rest of the region could leave the largest U.S. banks with exposure of about $50 billion.
The ratings firm said the net exposure--subtracting hedges--of the six largest U.S. banks is "manageable but not without financial costs."
Selling of riskier assets such as the euro intensified after the Australian dollar broke its key support band around US$1.0050, inviting selling from commodity trading advisers and model funds, Tokyo dealers said.
As the selling momentum eased, however, profit-taking bids came from macro hedge funds and other investors, sending the euro higher, Tokyo dealers said. The euro's firmness may also be due partly to European financial institutions repatriating funds invested in Asia, they said.
After falling to a fresh one-month low of $1.3421, the euro was at $1.3479 as of 0450 GMT, from $1.3465 late Wednesday in New York, according to EBS. It was at Y103.86, after touching a fresh one-month low of Y103.40, from Y103.75.
Amid the escalating European sovereign debt crisis, the euro's sentiment remains bearish and "that has not changed at all," said Atsushi Hirano, head of FX sales in Japan at the Royal Bank of Scotland.
In the near-term, market participants are focusing on bond auctions in France and Spain later in the global day and any spread movement of European sovereign bonds over German bonds, Hirano said.
Pressure has mounted in recent days on the European Central Bank to take drastic action to stabilize euro-zone bond markets, as investors shrugged off the bank's limited bond buying and European politicians sparred over the ECB's role in fighting the debt crisis.
Elsewhere, New York Fed President William Dudley is scheduled to speak later in the global day. Sumino Kamei, senior analyst at Bank of Tokyo-Mitsubishi UFJ, said she is keeping an eye on how he will describe the U.S. economy and the likelihood of another round of quantitative credit easing amid the deepening European debt crisis.
The dollar was at Y77.03 at 0450 GMT from Y77.06 late New York and at CHF0.9199 from CHF0.9192. The U.K. pound was at $1.5729 from $1.5731.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at about 78.210 from about 78.28.
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