Euro wallows around two-year lows against dollar

Euro wallows around two-year lows against dollar

By Lisa Twaronite
TOKYO | Wed Jul 11, 2012
(Reuters) - The euro wallowed around two-year lows against the dollar on Wednesday as investors waited to see if a German court would approve the use of euro zone's bailout fund to help contain the region's debt crisis.

The euro was changing hands at $1.2253, with Monday's EBS two-year low of $1.2225 in sight, opening the way to a test of $1.20 support. If that level is breached, the pair could move to test its June 2010 low of $1.1875.


The German Constitutional Court began a hearing into whether the euro zone's bailout fund, the European Stability Mechanism, and planned changes to the region's budget rules are compatible with German law.

German Finance Minister Wolfgang Schaeuble said any significant delay in approving the EU's permanent bailout fund could lead to more market turmoil and undermine confidence in the euro zone.

Investors have grown skeptical about the decision-making process in Europe and this has hurt euro sentiment, said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York.

"Meetings come and meetings go with investors fast-learning that ensuing policy statements appear to contain still-wet ink on the parchment." he said.

The latest meeting of euro zone finance ministers this week failed to provide much reassurance. While the ministers agreed to grant Spain an extra year through 2014 to reach its deficit reduction targets, they did not come up with a final figure for aid that country's ailing lenders but said some 30 billion euros would be available by the end of this month.

The euro fell to a five-week low against the yen overnight, at 97.20 yen, and last traded at 97.23 yen, according to Reuters data. Support was said to lie at 97.02 yen, the 76.4 Fibonacci retracement of the move from 95.59 yen to 101.63 yen, with bids also cited at that level.

The British pound was trading close to a 3-1/2-year high against the euro of 78.89 pence touched on Tuesday, with the common currency last at 78.94 pence.

The dollar last traded down slightly against the yen at 79.38 yen, as investors awaited the outcome of the Bank of Japan's regular two-day policy meeting beginning this session.

The Bank of Japan is expected to hold off on easing monetary policy despite easing moves last week by the central banks of Europe, Britain and China, convinced that the country's economy is still on track for a moderate recovery.

The Australian dollar also traded near an all-time high against the single currency of A$1.1974 hit on Tuesday, and was last buying $1.2022.