Single currency slips as finance ministers due to gather in Brussels
By Polya Lesova and Lisa Twaronite, MarketWatch
LONDON (MarketWatch) — The euro fell against the U.S. dollar Monday as European finance ministers prepared to meet to discuss a comprehensive response to the euro zone’s sovereign-debt crisis.
The dollar index (DXY 78.83, +0.37, +0.48%) , which measures the performance of the greenback against a basket of six currencies, rose to 78.679 from 78.379 late Friday.
The euro (EURUSD 1.3437, -0.0071, -0.5257%) sank 0.6% to $1.3464 at late morning in London.
“Some of the single currency’s vulnerabilities — which were temporarily ignored in last month’s brief bout of euro-phoria — are now bubbling back to the surface again,” said strategists at FxPro in a note. “Eventually, reality will bite.”
The key vulnerability is the region’s sovereign-debt crisis.
Euro-zone finance ministers will meet in Brussels at 5 p.m. local time Monday to discuss the strengthening of the European Financial Stability Facility, the euro area’s rescue fund created in response to the debt crisis.
Numerous European officials have called for the improvement of the capacity of the fund and widening of the scope of its activities.
Trading in the dollar, meanwhile, keyed on expectations for U.S. interest rates and the Federal Reserve.
“Reflecting the recent strong run of U.S. economic data, the market pricing of Fed rate hikes has been on the rise since the beginning of the year, and now the market is expecting a rate hike by January 2012,” said currency analysts at Barclays Capital.
This week, they said in a Monday note to clients, U.S. retail-sales data due out Tuesday and consumer price data on Thursday “will provide a gauge of whether the recent optimism in rates markets is justified.” Read U.S. Economic Preview for more on heavy week for economic data.
Barclays economists “expect slightly above-consensus numbers overall, which if realized would provide further support for the [dollar], in our view,” they said.
Also Monday, the British pound (GBPUSD 1.5987, +0.0002, +0.0125%) was little changed at $1.5997.
Against the Japanese yen, the dollar (USDYEN 83.4700, -0.0700, -0.0838%) slipped to ¥83.34, down from ¥83.46 in late North American trading on Friday. See real-time currency quotes and tools.
Earlier Monday, Japan’s Cabinet Office reported gross domestic product fell 1.1% in the October-December quarter on an annualized basis, marking the first economic contraction since July-September 2009.
The yearly GDP data for 2010 confirmed that China’s economy has surpassed that of Japan, which it had already done on a quarterly basis. But the latest quarterly figure beat economists’ forecasts. Read more on Japan GDP.
