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Saturday, February 23, 2013

Euro Touches Six-Week Low as ECB Bank Repayments Miss Forecast

The euro touched the lowest level against the dollar in six weeks after the European Central Bank said institutions will repay less of Long-Term Refinancing Operation borrowing next week than economists forecast. 

The 17-nation currency trimmed gains versus the yen as the European Commission forecast the region’s economy will shrink for a second year in 2013. The Australian dollar rose the most in seven weeks after central bank Governor Glenn Stevens said the bar for intervention was high. Japan’s currency weakened amid a White House meeting between Prime Minister Shinzo Abe and President Barack Obama, who made no mention of the yen during remarks after the discussion. 

“The market is trading on confidence and sentiment, and the LTRO news shows that tail risk has shrunk less than we thought,” Greg Anderson, New York-based head of Group of 10 currency strategy at Citigroup Inc., said in a telephone interview.

“What we’ve seen this week is the last of the euro longs getting squeezed out.” A long position is a bet that an asset will rise. 

The euro fell was little changed at $1.3194 at 5 p.m. in New York after touching $1.3145, the lowest level since Jan. 10. The shared currency declined 1.2 percent this week. It rose 0.3 percent 123.22 yen today after strengthening as much as 0.8 percent. The yen weakened 0.3 percent to 93.42 per dollar. 

The euro may depreciate to the 2013 low of $1.2998 it reached on Jan. 4 if it declines past a support level at $1.3151, Cilline Bain, a London-based technical analyst at Credit Suisse, wrote today in a client note. Support is an area on a chart where buy orders may be clustered.

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