September 16, 2011 / 12:55 PM / 8 years ago

FOREX-Euro falls, little progress from Ecofin

 (Recasts, adds details, quotes)	
 * Euro's gains run out of steam
 * Geithner urges unity in tackling EZ crisis
 * Juncker dashes expectations, leaves euro vulnerable
 By Anirban Nag	
 LONDON, Sept 16 (Reuters) - The euro fell on Friday after
euro zone finance ministers meeting in Poland gave no sign of
fresh action to tackle the region's debt problems, following a
call from U.S. Treasury Secretary Timothy Geithner for a united
front against the crisis.	
 Geithner, whose presence at the meeting highlighted how
concerned the United States is, said he believed Europe had the
capacity to contain its sovereign debt crisis.	
 Some investors were expecting the ministers to announce
concrete measures, with discussions focused on leveraging the
euro zone's bailout fund to make it more effective.	
 But Eurogroup president Jean-Claude Juncker said the
dialogue with Geithner was informal and they did not discuss
increasing the size of the fund with a non-euro zone member.	
 The euro was last down 0.8 percent at $1.3764 , off a
one-week peak of $1.3937 hit on Thursday but holding above a
seven-month trough below $1.35 plumbed on Monday. The common
currency has gained around 1.5 percent so far this week.	
 It fell to a session low of $1.3753 on the EBS trading
platform, with traders saying it extended losses after stop-loss
orders were triggered on the break of $1.3770, with more stops
cited at $1.3750.	
 "All the headlines that are coming out of the Ecofin meeting
are pretty negative and the euro's resilience after the
coordinated action from central banks on Thursday seems to be
coming off," said Jeremy Stretch head of currency strategy at
CIBC World Markets.	
 "There were some who went into the meeting with high hopes
and they appears at the risk of being dashed."	
 Technical charts indicated the euro would find support
around $1.3745, the 23.6 percent retracement of the fall from
$1.4548 on Aug.29 to $1.3495 on Sept.12. 	
 The euro had hit a one-week high after a coordinated move by
central banks on Thursday to provide dollars. Funding strains
which had hit some euro zone banks, including large French ones,
and were impacting the euro had appeared to be easing.	
 Wider spreads reflect elevated demand to borrow dollars in
the currency forward market and often support the greenback's
spot value against the euro.	
 In the options market euro/dollar month implied vols -
measure of investor demand to protect against spot price
volatility - were steady around 14.5 percent and off this week's
high of around 18 percent .	
 One-month risk reversals in favour of euro puts -- a measure
of the premium required to hold a put or a call in a currency
--came in slightly at 2.5 from around 2.9.	
 While investors are still wary of the euro, there was also
reluctance to take long positions in the dollar ahead of a
Federal Reserve meeting next week, where policymakers may flag
further easing measures to boost the economy.	
 That move, dubbed QE3, would weigh on the greenback and help
riskier assets rally, although analysts said some market players
thought "Operation Twist" was more likely.	
 In such a scenario the Fed would buy longer dated Treasury
bonds and sell the shorter dated ones to keep rates at the
longer end lower without expanding the balance sheet.	
 "Most people are anticipating Operation Twist where you
rebalance your balance sheet rather than expand it but there is
some nervousness about QE3," said Daragh Maher, FX strategist at
Credit Agricole.	
 "Twist would be positive for the dollar because it is
stimulative to growth. It would be seen as delivering stimulus
without printing a few extra billion dollars."	
 The dollar index was last up 0.5 percent at 76.623 .  
  Against the yen, the dollar remained stuck at 76.69 yen
 . The threat of intervention from the Japanese authorities
has helped keep the yen in a tight range and below its all-time
high of 75.94 yen.	
 (additiional reporting by Nia Williams; Editing by Toby Chopra,
John Stonestreet)	
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