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FOREX-Euro climbs from 4-month low but crisis remains – Reuters news and update details. I hope you will find useful information for making trading decision today.
* Euro lifts off four-month low vs dollar, eyes 2012 low
* Broad demand for safe havens supports dollar and yen
* Greek politics, Spanish bank problems weigh on sentiment
NEW YORK, May 18 (Reuters) – The euro lifted off a four-month low against the dollar o n Friday as investors pared bets against the single currency after a 4 percent drop this month, but ongoing concerns about Greece and instability in the Spanish banking system were likely to keep it under pressure.
Investors preferred the relative safety of the U.S. dollar and the Japanese yen and were reluctant to increase risk exposure after Moody’s cut the credit ratings of 16 Spanish banks on Th ursday.
With no U.S. data likely to drive foreign exchange markets, investors are most likely to consolidate positions ahead of the weekend after days of euro losses.
“The biggest risk today is position squaring into the weekend; however there appears to be increasing evidence that the euro is likely to move lower in the days ahead,” said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.
The euro tumbled to $ 1.2640, not far from its trough of 2012, before recovering to trade 0.2 percent higher at $ 1.2724.
Some traders said the euro’s recent decline could slow, given investors may be wary of holding positions over the weekend when leaders of the G8 major industrial economies meet.
The euro, down 4 percent against the dollar this month to date, was on track for its third straight week of losses, using Reuters data. The 14-day exponential relative strength index posted at 15.18, leaving the euro in oversold territory since May 7.
The euro fell to 100.17 yen, its lowest since early February, before recovering.
Strong demand for the greenback helped the dollar index to a four-month high.
Strategists said the euro would remain vulnerable to further bad news out of the euro zone, and looked set to test the 2012 trough. A break below there would take the euro to its weakest level versus the dollar since August 2010.
“If it’s not Greece, it’s Spain that we talk about to sell the euro. People are looking for bad news and they are concerned there appears to be no solution,” said Lutz Karpowitz, currency analyst at Commerzbank in London.
Greece faces fresh elections on June 17, with many investors increasingly concerned a victory for anti-bailout parties could lead to Greece exiting the euro zone.
A recent poll showed Greece’s conservatives have overtaken the anti-bailout leftist SYRIZA in popularity, although the volatile political mood meant most analysts saw the outcome of the elections as a significant risk.
Worries about Spain’s banks and prospects of more state bailouts for lenders kept the country’s borrowing costs high.
POLICY RESPONSE
Talk of a ban on naked short-selling of Spanish banking stocks lifted Europe’s bank shares and this brought some respite to the euro, but the common currency’s medium-term prospects remained bearish.
Reflecting that, one-month euro/dollar implied volatility climbed to around 11.55 percent while three-month risk reversals – a measure of relative demand for bets on the euro rising or falling – were at -3.45 vols on trading platform GFI in favour of more euro weakness.
“A lot of bad news is already priced in by now – it depends what happens in Greece and, of Spain, whether there will be a further decline in bank deposits – if that would happen then you would expect euro/dollar to go down,” said Jaco Rouw, fund manager at ING Investment Management in London.
No economic policy decisions are expected from the G8 but officials said U.S. President Barack Obama hoped to promote discussion on steps to resolve the euro zone crisis.
The dollar was flat against the yen at 79.35 yen and well above a three-month low of 79.12 touched on Thursday, according to Reuters data. Traders cited stop losses orders below 79.00 yen and 78.80 yen, while offers were likely to cap dollar gains around 79.50.
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