By William L. Watts and Sarah Turner, MarketWatch
FRANKFURT (MarketWatch) — The dollar was little changed versus the euro and other rivals Wednesday as traders moved to the sidelines a day ahead of the start of a potentially contentious summit meeting of European leaders.
The ICE dollar index, DXY +0.03% which measures the greenback against a basket of six currencies, traded at 82.426, up slightly from 82.365 in late North American trading on Tuesday.
The euro EURUSD -0.07% traded at $1.2496, little changed from late Tuesday’s $1.2499 trading level.
“This could be a reasonably long holding pattern until the headlines start to flow from the European Council’s heads of state summit tomorrow,” said Michael Turner, currency strategist at RBC Capital Markets.
The European Union’s two-day meeting is slated to discuss the region’s long-running debt crisis.
The meeting comes as German Chancellor Angela Merkel digs in her heels against calls by France and other euro-zone countries for a more rapid move toward mutualization of euro-zone debt or other steps to ease borrowing costs for the likes of Spain and Italy.
Fiscal rules
Merkel was widely quoted Tuesday as telling members of one of her coalition parties that total sharing of liabilities across the euro zone wouldn’t happen in her lifetime. Germany has insisted that any move toward euro bonds first see a move to more tightly coordinate budget policies and enforce fiscal rules across the region.
“The central conflict between the need for immediate bailout funds and the necessity for long-term structural reform is shaping up as the main story ahead of tomorrow’s EU summit,” said Boris Schlossberg, managing director at BK Asset Management.
“The euro has remained stationary for most of the early-morning trade, holding around the $1.2500 level with market players content to sit on the sidelines for now.”
Adding to this week’s raft of European developments, Egan-Jones Ratings lowered Germany’s sovereign rating to A+ from AA- and issued a negative watch on the rating on expectations the country will be left with significant uncollectable receivables due to its exposure to the euro zone.
The credit-rating firm said Merkel is fighting a losing battle in resisting calls for euro-zone bonds.
Tuesday also saw the release of a document outlining a path to tighter fiscal integration across the euro zone and a European banking union. Read more on Europe's plan for fiscal union.
Against the Japanese yen, the U.S. dollar USDJPY +0.21% bought ÂĄ79.51, up slightly from ÂĄ79.48 late Tuesday.
The British pound GBPUSD -0.18% fetched $1.5629, down from $1.5647.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
Sarah Turner is MarketWatch's bureau chief in Sydney.
