* Markets brace for euro zone debt sales
* Euro hits fresh 11-year low vs yen
* Aussie dollar drops as retail sales disappoint
* Euro/Aussie pulls up from last week's record low
By Masayuki Kitano
SINGAPORE, Jan 9 The euro hit a 16-month
low versus the dollar and an 11-year trough against the yen on
Monday following a slew of negative news from the euro zone over
Markets were also bracing for debt sales from Spain and
Italy on Thursday and Friday, seen as a major test of investor
willingness to plough more money into the region's troubled
countries following recent steps to address their debt problems.
The euro fell to as low as $1.2666 on trading platform
EBS, its lowest level since September 2010. Against the yen it
dropped to as low as 97.28 yen, its lowest level since December
The single currency later trimmed some of its losses
and last stood at $1.2694, down 0.2 percent from late
U.S. trading on Friday and was changing hands at around 97.65
yen, down 0.3 percent.
"We have revised down our 3-month EUR/USD forecast to 1.25
and during the initial quarter of this year do not expect
investors to stray far from their long USD positions," Jane
Foley, senior FX strategist at Rabobank, wrote in a client note.
"Insofar as 2012 has opened to a chorus of concerns as to
whether EMU can even stay the course this year, we expect
investors to continue hunting diversification trades. EUR/JPY,
EUR/AUD and EUR/CAD are all likely to see further downside in
U.S. jobs data released last Friday highlighted the
diverging growth outlook between the United States and Europe,
suggesting further weakness in the euro/dollar pair.
The newsflow from Europe over the weekend was also
far from inspiring. German magazine Der Spiegel reported on
Saturday the International Monetary Fund was losing confidence
in Greece's ability to clean up its public finances and work off
its mountain of debt.
Stop-loss selling helped accelerate the euro's drop on
Monday, market players said.
Underscoring the bearish view on the euro, currency
speculators boosted short positions in the currency to record
levels in the week ended Jan. 3, data from the Commodity Futures
Trading Commission showed on Friday.
One support area for the euro lies near $1.2600,
roughly the 76.4 percent retracement of its June 2010 to May
After having finished 2011 some 13 percent below its
2011 high near $1.4940, the euro has started 2012 on a weak
note, having shed 2.1 percent so far in January.
The euro's drop so far in 2012 has been driven by
selling in euro crosses such as euro/Aussie and euro/yen as well
as euro/Asia, said Rob Ryan, FX strategist for BNP Paribas in
"Positioning is beginning to get a little
stretched at this stage," Ryan said. "I think we're risking some
pretty fast reversals of these moves."
Still, the single currency is unlikely to see a
sustained rebound unless the euro zone's economic outlook
improves, Ryan said, adding that the euro could fall to $1.25 in
"We need to see the (euro zone's) economic data halt
its slide and I think we need to see banks start to lend to each
other. Neither of those are going to happen overnight," he said.
Market players are worried that euro zone countries
will have a hard time making progress on fiscal consolidation
unless the region's economic outlook improves.
The euro did manage to regain some ground versus the
Australian dollar, rising 0.4 percent to A$1.2475 and pulling
away from a record low of A$1.2408 hit last week.
Weaker-than-expected Australia retail sales weighed on
the Australian dollar and gave an added boost to the euro/Aussie
Against the greenback, the Australian dollar fell 0.6
percent to $1.0172.
Australian retail sales were flat in November,
disappointing hopes that lower interest rates would give a boost
to demand and adding to the case for a further cut next month.
The dollar held steady against the yen at 76.95 yen