Date: 2010-05-28
Euro slips as short-covering rally fades
TOKYO - The euro fell on Friday, giving back some of the hefty gains made the previous day when China said Europe would remain a major investment market for its foreign exchange reserves.
The euro slipped 0.5 percent to $1.2298 after having gained over 1.5 percent near $1.2400 in the previous session when stops above $1.2340 were triggered, traders said.
The euro, battered by Europe's debt woes, is down more than 7 percent on the month and charts indicate a monthly close below $1.2135 would favor additional weakness with the next downside support seen near $1.1640 -- a trough hit in November 2005.
"The euro-zone's fiscal problems are deep-seated. No one is truly confident about the euro right now and people think $1.2400 is probably the highest it can reach," a senior trader at a Japanese securities firm said.
Near-term support is at $1.2135, the 50 percent Fibonacci retracement of the 2000-08 advance. That lies just under the euro's four-year low of $1.2143 struck last week on trading platform EBS.
A trader for a Japanese bank said the euro's dip on Friday was likely due to selling by Japanese exporters.
"Since the euro has rebounded from levels around 109 yen or so, selling tends to emerge in Tokyo trading hours," he said, referring to the euro's recent bounce off of an 8- year low of 108.83 yen hit earlier in the week.
Medium-sized Japanese exporters have fallen behind in taking care of their euro-selling needs compared with major exporters, the trader added.
"Medium-sized exporters still have some exposure they need to take care of in June ... and they may sell again toward the month-end," he said.
The euro dipped 0.5 percent against the yen to 112.07 yen, easing back after climbing 2.7 percent on Thursday for its biggest one-day percentage rise in 15 months.
The euro had slipped back toward its four-year low against the dollar on Thursday after the Financial Times reported Beijing was concerned about its euro zone bond investments. But China's central bank on Thursday said the report was groundless.
South Korea's central bank also said it has no plans to reduce euro assets in its foreign reserves, the world's sixth-largest.
Market players said the reassuring comments from global reserve managers prompted investors to cover short positions but this was likely to provide only temporary momentum to the single currency.
The dollar edged up 0.1 percent against the yen to 91.14 yen.
A large amount of options in dollar/yen are expected to expire during New York trading hours on Friday with a strike at 90.00, and that may provide near-term support to the dollar against the yen, a senior options manager at a European investment bank said in a note to clients.
The options manager said positions at options desks are gamma short in yen crosses, a factor that has contributed to their recent market swings.
With gamma shorts, options desks tend to chase spot moves, to hedge their books.
Euro slips as short-covering rally fades
TOKYO - The euro fell on Friday, giving back some of the hefty gains made the previous day when China said Europe would remain a major investment market for its foreign exchange reserves.
The euro slipped 0.5 percent to $1.2298 after having gained over 1.5 percent near $1.2400 in the previous session when stops above $1.2340 were triggered, traders said.
The euro, battered by Europe's debt woes, is down more than 7 percent on the month and charts indicate a monthly close below $1.2135 would favor additional weakness with the next downside support seen near $1.1640 -- a trough hit in November 2005.
"The euro-zone's fiscal problems are deep-seated. No one is truly confident about the euro right now and people think $1.2400 is probably the highest it can reach," a senior trader at a Japanese securities firm said.
Near-term support is at $1.2135, the 50 percent Fibonacci retracement of the 2000-08 advance. That lies just under the euro's four-year low of $1.2143 struck last week on trading platform EBS.
A trader for a Japanese bank said the euro's dip on Friday was likely due to selling by Japanese exporters.
"Since the euro has rebounded from levels around 109 yen or so, selling tends to emerge in Tokyo trading hours," he said, referring to the euro's recent bounce off of an 8- year low of 108.83 yen hit earlier in the week.
Medium-sized Japanese exporters have fallen behind in taking care of their euro-selling needs compared with major exporters, the trader added.
"Medium-sized exporters still have some exposure they need to take care of in June ... and they may sell again toward the month-end," he said.
The euro dipped 0.5 percent against the yen to 112.07 yen, easing back after climbing 2.7 percent on Thursday for its biggest one-day percentage rise in 15 months.
The euro had slipped back toward its four-year low against the dollar on Thursday after the Financial Times reported Beijing was concerned about its euro zone bond investments. But China's central bank on Thursday said the report was groundless.
South Korea's central bank also said it has no plans to reduce euro assets in its foreign reserves, the world's sixth-largest.
Market players said the reassuring comments from global reserve managers prompted investors to cover short positions but this was likely to provide only temporary momentum to the single currency.
The dollar edged up 0.1 percent against the yen to 91.14 yen.
A large amount of options in dollar/yen are expected to expire during New York trading hours on Friday with a strike at 90.00, and that may provide near-term support to the dollar against the yen, a senior options manager at a European investment bank said in a note to clients.
The options manager said positions at options desks are gamma short in yen crosses, a factor that has contributed to their recent market swings.
With gamma shorts, options desks tend to chase spot moves, to hedge their books.