* Euro little changed, commodity currencies still under
* Markets cautious despite G8 pledge to combat market
By Ian Chua
SYDNEY, May 21 The euro started the week on a
subdued note and commodity currencies remained mired at
multi-month lows as investors found little comfort in a pledge
by world leaders to take all steps necessary to combat financial
The single currency last stood at $1.2786, a touch
firmer than its New York close on Friday as markets saw
Saturday's comments from a summit of the G8 leading
industrialised nations as short on details and long on rhetoric.
At the meeting, world leaders also backed keeping Greece in
the euro zone and revitalising a global economy increasingly
threatened by Europe's debt crisis.
"There's a lot of talk and no substance. Until you get some
certainty about Greece and the fear of contagion eases, the
volatility is here to stay," said Savanth Sebastian, an
economist at CommSec.
"Keep in mind there's no great news coming out of China as
well. There's a lot of talk about China slowing, so that's
On Friday, the euro was swept up by a wave of short-covering
that lifted it from a four-month trough of $1.2642. That low
should provide initial support, ahead of the 2012 low at
$1.2624. A break there would take the single currency back to
depths not seen since August 2010.
Worries about a messy Greek exit from the euro zone and
problems in Spain's banking sector had seen investors dumping
the euro in the past few weeks.
"A Greek exit would produce significant contagion to other
peripheral countries, where both sovereigns and banks would come
under pressure. Limiting the damage of contagion would depend
crucially on the speed and magnitude of the policy response,"
JPMorgan analysts wrote in a report.
Data from the Commodity Futures Trading Commission (CFTC)
released on Friday showed bets against the euro had risen to a
Not surprisingly, the safe-haven U.S. dollar and yen were
among the best performers last week. The greenback on Friday hit
a four-month high against a basket of major currencies.
It was trading slightly off that peak on Monday.
It was underperforming the yen, however, and last stood at
79.15, not far off a three-month low around 79.00 set on
The CFTC data showed a lightening of bearish yen bets,
although substantial short positions remained. This has left
intact the risk of further downside for dollar/yen if such
positions are forced to unwind, analysts said.
"We think that a move below 79.00 could trigger such a
squeeze and cause an accelerated move toward 78, where a threat
of intervention would likely provide the cross with support,"
BNP Paribas analysts wrote in a note.
Against a jittery backdrop, commodity currencies such as the
Australian dollar continued to struggle. The Aussie was last at
$0.9835, still within striking distance of a near
six-month trough of $0.9795 plumbed on Friday.
There is little in terms of market-moving data out of Asia
on Monday, leaving the focus firmly on developments in Europe.