Forexpros –
Forexpros – The euro edged up against the U.S. dollar in Asian trade Friday, bouncing back from an eight month low, as global equities tumbled on fears of worsening European debt and the threat of a U.S. recession.
EUR/USD hit 1.3478 in early Asian trade, the pair’s highest since Thursday; the pair subsequently consolidated at 1.3480, rising 0.13%.
The pair was likely to find support at 1.3377, the low of January 19, and resistance at 1.3720, Monday’s high.
Earlier Thursday EUR/USD fell to 1.3386, its lowest level since January 19, a day after the U.S. Federal Reserve said that it foresaw “significant downside risks” in the U.S. economy at the conclusion of its Federal Open Market Committee’s policy meeting.
The Fed’s decision to launch a USD400 billion “Operation Twist”, a combination of buying and selling of short and long term Treasuries, failed to impress investors hoping for a liquidity boost to the ailing U.S. economy.
Meanwhile, European finance officials were reportedly planning to recapitalize 16 banks in the region deemed to be on the threshold of financial stress and in need of fresh funds immediately.
The Financial Times reported that the European Banking Authority’s recent evaluation of 91 European banks, determined that 16 institutions failed its stressed economic scenario test and were advised to raise additional capital by the end of the year.
European shares plummeted in Thursday trade, with France’s CAC 40 sinking 5.25% to 2,781.68, Britain’s FTSE 100 sank 4.67% to 5,041.61, and Germany’s DAX surrendered 4.96% to end the session at 5,164.21.
Earlier Thursday, the U.S. Labor Department reported that the number of Americans filing for initial jobless benefits fell by 9,000 to a seasonally adjusted 423,000 for the week ending September 16.
Market expectations were for the figure to decline to 420,000.
The encouraging labor numbers did little to prevent aggressive sell-offs on Wall Street, as the Dow Jones Industrial Average dropped 3.51% to 10,733.83, the Nasdaq Composite Index fell 3.25% to 2,455.67, and the S&P 500 slumped 3.19% to close at 1,129.56.
Meanwhile, the euro was higher against both the British pound and the Japanese yen, with EUR/GBP up by 0.06% to hit 0.8774, and EUR/JPY adding 0.25% to hit 102.89.
European Central Bank President Jean-Claude Trichet was scheduled to deliver a speech later Friday.
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