Euro bounces back on fresh appetite for risk
On Tuesday 25 January 2011, 1:37 SGT
The euro bounced back on Monday, recovering from an early slide to hit fresh two-month highs against the dollar on growing optimism the European Union is finally getting to grips with its debt crisis.
Dealers said that after some early profit-taking, the euro turned firmer as it appears the eurozone is making real progress towards setting up a permanent debt rescue mechanism after Greece and Ireland were bailed out last year.
The stock markets were higher too, suggesting a greater appetite for risk.
In late London trade, the euro was up at fresh two-month highs of $1.3672, compared with $1.3611 in New York late Friday.
The dollar slipped to 82.40 yen from 82.60 yen on Friday.
"The euro has staged an impressive relief rally over the last couple of weeks with the euro climbing from on intra-day low of $1.2860 on 10th January to within touching distance of $1.3650 overnight," said Lee Hardman, an analyst at The Bank of Tokyo-Mitsubishi UFJ.
"The market is becoming overly optimistic that the eurozone authorities will soon unveil fresh steps which can bring an end to the eurozone debt crisis once and for all minimizing any economic fall out.
"Such optimism is not usual and has proceeded and followed previous steps unveiled by the European authorities. However, bouts of renewed optimism have gradually faded away as the harsh economic reality comes back into view," Hardman cautioned.
Dealers noted in particular, Spain's announcement on new plans to reform and stabilise its regional savings banks, seen as the weak link in the financial system.
Kathleen Brooks of Forex.com said the Spanish lead helped sentiment given fears that if Portugal were to need a bailout, then Madrid would be next on the list but as a much bigger and possibly fatal problem for the eurozone.
On Tuesday 25 January 2011, 1:37 SGT
The euro bounced back on Monday, recovering from an early slide to hit fresh two-month highs against the dollar on growing optimism the European Union is finally getting to grips with its debt crisis.
Dealers said that after some early profit-taking, the euro turned firmer as it appears the eurozone is making real progress towards setting up a permanent debt rescue mechanism after Greece and Ireland were bailed out last year.
The stock markets were higher too, suggesting a greater appetite for risk.
In late London trade, the euro was up at fresh two-month highs of $1.3672, compared with $1.3611 in New York late Friday.
The dollar slipped to 82.40 yen from 82.60 yen on Friday.
"The euro has staged an impressive relief rally over the last couple of weeks with the euro climbing from on intra-day low of $1.2860 on 10th January to within touching distance of $1.3650 overnight," said Lee Hardman, an analyst at The Bank of Tokyo-Mitsubishi UFJ.
"The market is becoming overly optimistic that the eurozone authorities will soon unveil fresh steps which can bring an end to the eurozone debt crisis once and for all minimizing any economic fall out.
"Such optimism is not usual and has proceeded and followed previous steps unveiled by the European authorities. However, bouts of renewed optimism have gradually faded away as the harsh economic reality comes back into view," Hardman cautioned.
Dealers noted in particular, Spain's announcement on new plans to reform and stabilise its regional savings banks, seen as the weak link in the financial system.
Kathleen Brooks of Forex.com said the Spanish lead helped sentiment given fears that if Portugal were to need a bailout, then Madrid would be next on the list but as a much bigger and possibly fatal problem for the eurozone.
