Euro lower against dollar

The euro came off six-month highs against the dollar, falling sharply yesterday as players took profits on its recent gains and adjusted positions ahead of key US employment data later in the week.

Dealers said the US jobs report will be closely looked at for the next lead on the US recovery given that the US Federal Reserve has indicated it is ready to introduce new stimulus if needed to keep the economy on track.

However, the dollar fell sharply last month after the Fed took that position, sparking concerns already very loose US monetary policy would be made even looser, putting pressure on the US currency as a result.

Yesterday, it was time for some easy profit-taking, dealers said, with the dollar bouncing back strongly after the euro hit $1.38 earlier in the day.

In late London trade, the euro was at $1.3693, off an early high of $1.3807 – the best level since March 17 – after weekend supportive comments from Chinese Premier Wen Jiabao. Late Friday in New York, the euro was at $1.3787.

The dollar was slightly firmer at 83.37 yen, up from 83.25 yen on Friday.

“The euro was boosted on the Asian open by weekend comments from Chinese Premier Wen, who said that ‘I have made clear that China supports a stable euro’,” said currency strategist Elsa Lignos at RBC Capital Markets.

Speaking in Athens on Saturday, Mr Wen pledged to support cash-strapped Greece and the eurozone.

“China will make a big effort to support the eurozone economy and Greece,” Mr Wen told a press conference.

He added on Sunday that China would “support the stability of the euro” and Beijing would “not reduce the amount of European bonds that are part of the Chinese foreign exchange reserves”.

Yesterday, Mr Wen said in Brussels that China hoped the major currencies would remain relatively stable in the interests of ensuring global growth as governments wind down stimulus measures taken to cope with the slump.

Beijing has been under intense US and EU pressure to allow the yuan to appreciate more, claiming that it is kept deliberately undervalued so as to boost Chinese exports at their expense.

In London, the euro changed hands at $1.3693 against $1.3787 late in New York on Friday, at 114.16 yen (114.79), 0.8636 pounds (0.8712) and 1.3320 Swiss francs (1.3412).

The dollar stood at 83.37 yen (83.25) and 0.9729 Swiss francs (0.9734).

The pound was at $1.5855.

On the London Bullion Market, the price of gold was 1,313.50 dollars an ounce, down from $1,316.25 an ounce late on Friday when it hit a record high of $1,320.70 on the back of the weak US currency.

Across Europe, Britain’s FTSE 100, Germany’s DAX and France’s CAC 40 ended the day between 0.7 and 1.2 per cent lower.

On Wall Street the Dow Jones, S&P 500 and Nasdaq Composite were down between 0.6 and 1.4 per cent around the time European bourses were closing.

Greek banks gained 2.9 per cent after Greece pledged to cut next year’s budget deficit faster than agreed in a €110 billion IMF/EU bailout deal, vowing another year of tough austerity to exit a debt crisis.

The recent retreat for the FTSEurofirst 300 “is not altogether surprising,” said Bill McNamara, technical analyst at Charles Stanley in a note. “The medium-term uptrend is currently implying the possibility of support at around 1,028 and that line might come into play sooner rather than later.”

In a bearish signal for equities, the Euro STOXX 50 index fell 1.2 per cent at 2,701.02 points, well below its 50 per cent Fibonacci retracement of its fall from a high in April to a low in May at 2,737.62 points.