Euro slips on Spain worries as market awaits G7

Tue Jun 5, 2012 8:43am EDT
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NEW YORK (Reuters) - The euro fell on Tuesday as Spain's Treasury minister said high borrowing costs meant credit markets were closing to Spain, though losses were capped as investors waited for any comments from an emergency conference call of Group of Seven finance chiefs.

The G7 ministers and central bankers were set to discuss the euro zone's worsening debt crisis, although the chances of a significant breakthrough looked slim.

"Everyone is looking for some clarity from the G7 teleconference today and I am afraid they are unlikely to get it," said Brad Bechtel, managing director at Faros Trading in Stamford, Connecticut. "The best we can hope for is some announcement of global coordinated stimulus."

But Bechtel emphasized it was unlikely this would be the platform for any major G7 announcement on managing the crisis.

The G7 talks had boosted the euro earlier but it fell after Spain's Treasury minister Cristobal Montoro highlighted the funding problems facing Spain as investors worried that the country may have to seek external aid.

The euro fell 0.5 percent on the day to a session low of $1.2409, more than a cent below an earlier one-week high.

On Friday, it hit a two-year low of $1.2286, using Reuters data.

"People will be happy to sell into moves above $1.25," said Anders Soderberg, currency strategist at SEB in Stockholm.

The euro has recovered since weak U.S. jobs data on Friday weighed on the dollar, feeding speculation about the prospect of another bout of monetary easing in the United States. But Soderberg said this was merely "a short-term break in what now seems to be a well-established downtrend".   Continued...

An illustration picture shows Euro banknotes in Brussels November 28, 2011. REUTERS/Thierry Roge