The euro remained under pressure on Thursday on turmoil surrounding eurozone debt but held above a two-month low against the dollar after a push to the downside was stemmed largely by corporate demand.
With US markets closed for the Thanksgiving holiday, liquidity was thin and trade was dominated by positioning, traders said, as the greenback climbed above parity against the Swiss franc for the first time in two months and also hit a two-month peak against a currency basket.
Sterling also hit a one-month low against the dollar before recovering a bit.
The euro fell as low as $1.3287, just shy of a two-month low of $1.3284 hit on Wednesday. Traders said buying by European exporters supported the pair, while there was talk a few Middle-eastern accounts bought the single currency.
Failure to extend Wednesday's low prompted players to unwind short positions, traders said. The euro was also supported by gains on crosses, such as against the Swiss franc.
"The focus is still squarely on the eurozone, although it is more of an issue for the fixed income market and the euro is holding up reasonably well today," said Christian Lawrence, currency strategist at RBC Capital Markets.
By 1443 GMT, the euro was up slightly at $1.3340. Traders said option expiries at $1.3350 could check further gains.
Next support was seen at $1.3232, the 61.8 percent retracement of the August to November rally. A break of that support could test the euro's 200-day moving average at $1.3133.
The euro was steady against the yen at 111.40 yen. It fell to 110.32 yen on Wednesday, a level last seen in mid-September.
"Contagion doesn't look to be spreading at the moment and the market is in a range for now, with no new news," said Lauren Rosborough, currency strategist at Westpac.
Eurozone periphery bonds were subdued, although fears of contagion from Ireland's debt crisis remained high. Irish and Spanish bonds underperformed with 10-year yield spreads over Bunds up to 10 basis points wider. Ireland's belt-tightening measures released Wednesday did little to dispel fears of its financial crisis spilling over into other eurozone peripheral countries.
European clearing house LCH.Clearnet raised the margin requirements to trade Irish government debt on Thursday, citing widening spreads over triple-A eurozone benchmarks. Some traders said worries that private investors may have to accept losses in any eurozone sovereign debt restructuring from 2013 could push up the premium investors demand for holding eurozone debt, undermining the euro.
Adding to eurozone concerns, traders said riskier currencies such as the Australian dollar were hurt after a deputy central bank governor of the People's Bank of China said on Wednesday it would use all the policy tools at its disposal to steer money and credit growth back to normal.
Comments
Comments are closed.