Euro recovers in New York

The euro recovered most of its losses late in the New York session on Monday after a media report saying European officials are working on a detailed plan aimed at shoring up European bank stability. CNBC said the plan involves issuing bonds and using the proceeds to purchase debt of distressed European states, though it said it may not be the only plan under discussion.
The news sent the euro well off session troughs, though it remained lower on the day as investors remained on alert for signs of a Greek debt default. The euro was volatile through the session, reacting to each piece of significant news, with investors reluctant to be caught on the wrong side of sentiment.
"The idea that the plans are well advanced and near approval suggests that we might get some positive resolution out of Europe this week," said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey. "You're getting a bit more of risk-on." CNBC said the plan involves money from the European Financial Stability Facility to capitalise a special purpose vehicle that would be created by the European Investment Bank, a bank owned by the member states of the European Union. The SPV would issue bonds from investors and use the proceeds to purchase sovereign debt of distressed European states, CNBC said.
Earlier, the euro was well down against both the dollar and yen as disappointment with new efforts by European policymakers to contain the eurozone debt crisis again raised the spectre of a Greek debt default. While there were no official developments from weekend International Monetary Fund and G20 meetings, most agreed a larger aid package, the re-capitalisation of the weakest banks and a plan for an orderly Greek default was what Europe needs.
Finland and Germany will vote on the rescue fund this week and passage of proposed changes should bode well for the euro. But Lien noted October 3 is a key focus. In late afternoon New York trade the euro was at $1.396, down 0.04 percent on the day on electronic trading platform EBS. It fell to an eight-month low of $1.3360 against the dollar prior to the New York session. Against the yen it was down 0.1 percent at 103.176 yen, having earlier touched a decade low of 101.946.
The euro hit a New York session low of $1.34144 after data on new single-family US home sales that was dismal, though in line with expectations. The dollar slipped 0.2 percent versus the yen to 76.459, with the session low at 76.217, not far from an all-time low of 75.941 yen set last month on EBS.