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Forexpros – The euro moved lower against the U.S. dollar in Asian trade Tuesday, on fresh concerns over European sovereign debt and a possible downgrade to French banks due to exposure to Greek outstanding loans.
EUR/USD hit 1.3660 in early Asian trade, the pair’s lowest since Friday; the pair subsequently consolidated at 1.3676, easing 0.03%.
The pair was likely to find support at 1.3526, the low of February 22, and resistance at 1.3937, last Friday’s high.
Speaking from a meeting of central bankers in Basel, Switzerland, European Central Bank President Jean-Cluade Trichet, earlier Monday, addressed mounting worries that Greece was in danger of a near default saying,”We are calling upon the Greek government with great firmness.”
“It is in the interest of Greece and for the long-term prosperity of this country. I don’t think there is any doubt that if they confirm all their commitments, they would be in a better situation,” Trichet added.
Trichet said it remains his “working assumption” that Greece would take the steps needed to win approval from the ECB, the International Monetary Fund and the European Commission to receive its next batch of funding.
Weighing on the euro was a report over the weekend by Bloomberg News that three French banks were vulnerable to a downgrade from Moody’s Investor service because of their exposure to Greece’s sovereign debt.
Slumping bank issues on European markets pulled stocks lower in Monday trade, with France’s CAC 40 dropping 4.02% to 2,854.81, Britain’s FTSE 100 falling 1.63% to 5,129.62, and Germany’s DAX declining by 2.27% to end the session at 5,072.33.
The euro has lost 5.5% against the U.S. dollar this month on continued worries about European debt, and Trichet has indicated that the ECB may not be raising interest rates again any time soon, eliminating a major support for the shared currency.
The announced resignation of ECB Executive Board member Juergen Stark last Friday, sent the euro to its lowest point since February.
Wall Street shares recovered from session lows after a report in the Financial Times indicated that China was considering a purchase of Italian bonds. The Dow Jones Industrial Average gained 0.63% to 11,061.12, the Nasdaq Composite Index rose 1.1% to 2,495.09, and the S&P 500 edged up 0.7% to close at 1,162.27.
Meanwhile, the euro was lower against the British pound and the Japanese yen, with EUR/GBP down by 0.15% to hit 0.8609, and EUR/JPY falling 0.20% to hit 105.40.
Investor focus was expected to turn to the release of monthly retail sales figures by the U.S. Census Bureau scheduled for later in the week.
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