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The euro stabilized Friday.
Written by article default Friday, 23 April 2010 08:44
Market OverviewThe euro stabilized Friday, emerging only slightly lower against the dollar as cash-strapped Greece formally requested a lifeline after the euro overnight dropped to a one-year low.
The details of an International Monetary Fund-European Union aid package to Greece still have to be worked out, and possible objections from Germany or other expected contributors to a bailout could derail the plan, which would weigh on the euro.
Worse-than-expected U.S. durable goods data for March took some shine off the euro's rally as investors turned slightly away from riskier assets.
Meanwhile, the dollar gained more than 0.6% against the yen as the greenback got some support on a CNBC report that cited unnamed sources saying a growing bloc of members of the Federal Reserve's interest rate-setting panel favors a near-term sale of assets as the Fed seeks to shrink its balance sheet.
The single currency traded at USD1.3271 versus the U.S. dollar, down from around USD1.3313 in North American trade late Thursday but up from a low of USD1.3204 notched in Asian activity, which marked the currency's lowest level since May 2009.
Against the yen, the dollar bought JPY93.50, compared to JPY93.39 late Thursday.
Market expectation
The common currency should enjoy a modest relief rally, strategists said, as the aid request releases some pressure from a situation that had gone in recent days from a slow simmer to a boil, but as larger, structural issues such as low growth prospects and profligate spending again come into focus, the euro will falter.
The details of an International Monetary Fund-European Union aid package to Greece still have to be worked out, and possible objections from Germany or other expected contributors to a bailout could derail the plan, which would weigh on the euro.
The euro could enjoy a rally to around USD1.3350, according to analysts, before longer-term issues conspire to drag the common currency lower.