By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The euro gained ground on the dollar Monday, erasing an early loss on speculation that European leaders will move to strengthen fiscal union across the shared-currency region.
The euro EURUSD +0.6684% rose as high as $1.25, when backed off to $1.2480, still, up from $1.2422 in late North American trade on Friday. It had slipped as low as $1.2384 during Asian trading hours, approaching its lowest level in nearly two years. The shared currency hasn’t closed above $1.25 since May 29, according to FactSet Research.
Analysts also said traders may be forced to reverse some positions which are heavily tilted towards further declines in the shared currency.
The dollar index DXY -0.30% , which measures the greenback’s performance against a basket of six major currencies, declined to 82.639 from 82.878 Friday.
Overall activity was light, with London markets closed for a public holiday.
News reports over the weekend indicated European officials are weighing a move to increase fiscal coordination across the euro zone. The Wall Street Journal late Sunday said Germany has signaled it may be open to euro bonds or further support for the region’s banking sector, provided other countries agree to transfer more power to Europe. Read about the report.
“Such policy would move the [euro zone] toward a much more integrated fiscal union providing much better credit support for the region including the prospect of euro bonds,” said Boris Schlossberg, director of currency research at GFT.
The Journal report noted there was no guarantee European leaders will overcome differences, saying that calls to give up sovereignty over national budgets are likely to meet fierce resistance in some member states. It also could take several quarters or even years to make possible, analysts said.
The dollar fell Friday, after official data showed the U.S. added just 69,000 jobs in May, far below analysts’ expectations. Read more about the payrolls report.
Against the Japanese yen, the dollar USDJPY +0.1856% rose to 78.31 yen after briefly trading below the ÂĄ78 mark earlier in the day.
On Friday, the dollar had dropped to a low of ÂĄ77.63 but ended North American trading at ÂĄ78.14. Read about yen, payrolls report.
The yen, which like the dollar and the Swiss franc is widely considered to be a safe-haven currency, generally tends to rise during periods of market volatility.
Deborah Levine is a MarketWatch reporter, based in New York.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Varahabhotla Phani Kumar in Hong Kong contributed to this report.
