Euro slumps to four-year low
Tokyo, June 7, 2010
The euro fell broadly on Monday, hitting its lowest in more than four years against the dollar with investors increasingly nervous about more slides in the currency after a clear break below a chart support point.
Market players said the euro's close on Friday below a 50 per cent retracement of its 2000-2008 rally at $1.2135 was seen as a bearish chart signal, adding to the single currency's woes.
The euro fell to an eight-year trough versus the yen as mounting worries about the region's debt problems drove investors to sell the single currency.
Investors dumped riskier assets such as the higher-yielding Australian dollar and unwound leveraged carry trades, moving funds to the US dollar, the yen and the Swiss franc, considered safe-haven assets in times of volatility.
The euro fell to its lowest point on record against the Swiss franc as more market players chased the euro down after it cracked below 1.40 francs on Friday in the absence of Swiss central bank efforts to stem strength in its currency.
Investors were aggressively removing themselves from risk on a number of factors such as mounting worries about Hungary and the euro zone, disappointing U.S. jobs numbers and falling commodity prices.
Lack of any expression of strong concerns at a meeting of G20 finance ministers over the weekend or from euro zone policymakers after the euro's fall below a key chart support around $1.20-1.21 on Friday also encouraged market players to sell the euro more, traders said.
'Europe's sovereign debt problems are just not going away and it's difficult to see a light at the end of tunnel for it just yet,' said Jonathan Cavenagh, a currency strategist at Westpac.
'There might be a bit of support around the $1.18 handle, but we expect it to fall to $1.15 eventually.'
The market's near-term focus will be on comments by euro zone policymakers with the euro now clearly in a downtrend, and how the European Central Bank will deal with the deepening euro debt crisis when it holds a policy-setting meeting later in the week, a proprietary trader for a Japanese bank said.
The euro fell as low as $1.1876 on the EBS trading platform, having fallen past $1.1900 in early Asian trade when more stop-loss selling was triggered.
Traders say the next option trigger is at $1.1850 and the likely target at $1.1825, the euro's March 2006 low.
The euro came under fresh pressure last week on growing concerns that Hungary could be facing a Greek-style debt crisis.
Also weighing on the euro were comments by French Prime Minister Francois Fillon on exchange rates.
Fillon said he was unconcerned by the current level of the euro to the dollar and saw only 'good news' in the parity between the two currencies. Later his remarks were clarified saying the reference to 'parity' was about the general evolution of the exchange rate between the euro and the dollar.
The euro's weakness helped the US dollar index climb to a fresh 15-month high of 88.708, eyeing the 2009 high of 89.62.-Reuters