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FX round-up: Euro recovers ahead of summit

Date: Wednesday 27 Jun 2012

FX round-up: Euro recovers ahead of summit

The euro fell to a two-week low against the dollar on Tuesday but recovered later in the session as Spanish bond yields rose and markets looked ahead to Thursday's EU summit.

The single currency was pressured by a weaker than expected sale of short-term Spanish bonds. Average bond yields rose sharply, sparking fresh concern about how long Spain can finance itself.

Meanwhile hopes that any progress will be made in resolving the Eurozone debt crisis remain low. The summit comes as Cyprus became the latest Eurozone nation to ask for financial aid.

Confidence in any potential progress at the summit was also shaken by reports that German Chancellor Angela Merkel said that Europe would not have shared total debt liability "as long as I live."

Risk aversion gave the Japanese yen a boost and lifted it from two-month low against the dollar. The dollar slipped to ¥79.48 from ¥79.67 on Monday.

Demand for the yen increased after Japan’s lower house of parliament passed a controversial consumption tax bill, which will double sales tax. Prime Minister Yoshihiko Noda said the tax rise is key if debt and rising welfare costs are to be tackled however the vote has exposed a deep division within the ruling party and there is growing concern about the outlook for Noda’s government.

Elsewhere the dollar came under pressure with the dollar index, which measures the US currency against a basket of six major currencies, fell to 82.365 from 82.461 the previous session.

Sterling climbed against the euro on Tuesday amid concerns the summit this week will make little progress in resolving the debt crisis. Sterling also gained against the dollar at $1.5647 from $1.5572 on Monday.




CJ

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