Euro dips, China boost for Aussie dollar fades

The euro slid just over half a percent against the dollar in a slack start to the week on Monday dominated by the fallout of new economic stimulus in China and concerns over Greece. The dollar's worst performance in a month last week had added to a growing number of signals casting doubt on its ability to extend a year-long rally against other major currencies.
-- Euro broadly weaker but still holding above $1.07 But allied to the programme of money-printing embarked upon by the European Central Bank, the risk of Greece leaving the single currency within months still looks to make the euro a good bet for more weakness.
IMF meetings over the weekend did nothing to ease those fears and the euro eased 0.6 percent to $1.0740 in morning trade in Europe. "We see the dollar moving towards parity with the euro in the third quarter, but if something happens around Greece, it may come sooner," said Lee Hardman, a strategist with Bank of Tokyo-Mitsubishi UFJ in London.
"(Beyond monetary policy) this is the other big risk hanging over the euro at the moment." The Australian and New Zealand dollars both eased back after solid gains following China's move over the weekend to boost banks' lending power in Asia's biggest market.
The People's Bank of China (PBOC) on Sunday cut the amount of cash that banks must hold as reserves (RRR) in its latest attempt to help spur bank lending and combat slowing growth. China is the biggest export market for both Australia and New Zealand and an easing of demand there has been at the heart of a steady slide which for the Aussie now dates back two years.
The latter touched a near one-month high of $0.7844 in Asia deals after the China move. It last traded at $0.7785, flat on the day. The kiwi did slightly better, up 0.4 percent at $0.7693. In the near term, the Aussie could test its March high of $0.7939 if the recent weakness of the US dollar continues, said Heng Koon How, senior FX strategist for private banking and wealth management at Credit Suisse in Singapore. "But this should not be mistaken as a sign of Australian dollar strength," Heng said. "Our 12-month forecast remains unchanged at $0.70.