* Euro rises vs dollar and crosses in choppy trade
* But euro vulnerable to "currency war" talk
* Concerns about Cyprus, Spain, Italy also weigh on euro
* Investors eye BOJ, euro zone GDP and G20 meetings later in
By Julie Haviv
NEW YORK, Feb 11 The euro gained against the
dollar and yen on Monday after notching three straight days of
hefty losses, but the currency remained susceptible to political
and fiscal uncertainty in the euro zone as well as unease about
its gains last month.
The euro could turn lower before a meeting of the Eurogroup
of euro zone finance ministers on Monday and a G20 meeting later
in the week, both of which should highlight tensions over
whether some countries are deliberately trying to weaken their
The Group of Seven nations are considering issuing a
statement this week reaffirming their commitment to
"market-determined" exchange rates in response to heating
rhetoric about a currency war, two G20 officials said on Monday.
"The G20 meeting in Moscow this week seems certain to focus
on 'currency wars' but beyond a bland call for countries not to
engage in competitive devaluations it's hard to see what
concrete steps can be taken at this stage," said Kit Juckes, fx
strategist at Societe Generale in London.
"The 'currency war' is a product of easy Fed policy, and the
U.S. is winning comfortably," he said. "Japan's response can't
be criticised in the context of the deflation they have been
stuck in, and Europe cannot agree on a common position."
French Finance Minister Pierre Moscovici said on Monday that
euro zone countries need closer cooperation on exchange rate
policy and the bloc's finance ministers would discuss the issue
when they meet.
Corporates were cited as main buyers of the euro on crosses
such as against the yen and sterling,
helping the euro recover from a session low against the dollar
of $1.3324 earlier on Monday, the lowest since Jan. 24.
The euro last traded up 0.2 percent at $1.3384, with
Middle East investors cited as main buyers. Morgan Stanley
strategists said the euro could pull back towards $1.3260, its
50-day moving average.
Against the yen, the euro rose 0.9 percent to 124.98 yen,
pulling away from Friday's one-week low of 123.43, but still
some way off the 34-month high of 127.71 yen hit on Feb. 6.
"While the speed of the euro recovery was probably overdone,
this correction down is also likely running out of steam. There
are however risks with the Italian elections (and) Cyprus and we
could see some pullback today with the Eurogroup meeting," said
Ulrich Leuchtmann, head of FX research at Commerzbank.
Concerns about the terms of a bailout for Cyprus, which will
be high on the Eurogroup's agenda, would cap the euro's gains,
There are also growing worries about a political scandal in
Spain, and about Italy in the run-up to the Feb. 24-25 election.
"Nevertheless, I think these risks are not systemic and
therefore only have a limited effect on the euro exchange rate,"
Leuchtmann said, predicting the euro to end this week slightly
The euro sold off last week after European Central Bank
President Mario Draghi kept alive expectations of rate cuts and
said the bank would monitor the economic impact of the
"The pace of the euro's gains in January made me feel
uncomfortable, it was too far, too fast...if news from Cyprus,
Spain and Italy is not good we could see $1.30 again," said Jane
Foley, senior currency strategist at Rabobank.
The euro appreciated 2.9 percent against the dollar in
January, its best monthly performance since Oct. 2011. So far
this month, however, the euro has depreciated 1.4 percent.
BANK OF JAPAN
Much of Asia was shut for the Lunar New Year holidays
keeping volumes on the lower side. Traders braced for more
volatility later in the week with U.S. retail sales, European
growth data, the G20 meeting in Moscow and a Bank of Japan
The BOJ is expected to keep monetary policy steady,
particularly as Japanese authorities have come in for criticism
from euro zone politicians for their aggressive policy actions
that resulted in a weaker yen.
The dollar last traded up 0.8 percent at 93.42 yen
, but below a 33-month high of 94.06 yen hit Wednesday.
In the past few months, the yen has slumped as Prime
Minister Shinzo Abe put intense pressure on the central bank to
take aggressive easing measures to revive the economy.
The yen's weakness is likely to persist as it is widely
expected the new BOJ chief, who will take over next month, is
likely to be someone who is amenable to Abe's policy stance.