* 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, GDP data and G20 meetings later in week
By Anooja Debnath
LONDON, Feb 11 The euro rose on Monday as
speculators bought it on dips, but was vulnerable to political
and fiscal uncertainty in the euro zone and growing unease about
its recent gains among some European leaders.
Some strategists said the euro could edge lower before a
Eurogroup meeting on Monday and a G20 meeting later in the week,
given tensions over whether some countries are deliberately
trying to weaken their currencies to boost export
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.
French Finance Minister Pierre Moscovici said on Monday that
euro zone countries need closer cooperation on exchange rate
policy and the bloc' 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 of $1.3358, earlier
on Monday, which was close to a two-week low.
The euro was last trading up 0.3 percent on the day
at $1.3408, 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 1 percent to 125.39 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, analysts said.
There are also growing worries about Spain's political
scandal, while confidence in Italy has been shaken 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 had gained around 5.5 percent against the dollar,
since the beginning of January to its peak of $1.3711 on Feb. 1.
Since then it has shed about 2.5 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 allowing the yen to weaken.
The dollar climbed 0.8 percent to 93.37 yen, having
surged to a 33-month high of 94.075 yen last Wednesday. Traders
reported U.S. investors selling the yen.
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.