Euro edges down as debt, growth worries linger

Mon Dec 19, 2011 7:50am EST
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By Richard Hubbard

LONDON (Reuters) - The euro edged down and defensive stocks rose on Monday as European policymakers prepared for talks on enhancing the IMF's arsenal and tightening euro zone fiscal rules, while the death of North Korean leader Kim Jong-il fed fears of instability in Asia.

The single currency also slipped after Fitch's warning late Friday that it could downgrade France and six other euro zone countries as it believes that a comprehensive solution to the region's debt crisis is "technically and politically beyond reach".

"The market can to some extent deal with a lower growth profile but what it cannot manage is the ongoing policy paralysis in the euro zone," said Gavin Friend, currency strategist at NAB Capital.

"I can't see any euro rallies lasting for long," he added.

But U.S. stock index futures pointed to a higher open on Wall Street on Monday ahead of the release of the National Association of Home Builders' December housing market index.

The euro was down about 0.2 percent at $1.3013 versus the dollar after falling to an 11-month low last week of $1.2945. The dollar index .DXY was flat for the day at 80.234, paring gains made in the Asian session.

European shares rose on demand for defensive stocks as the Fitch warning about possible credit downgrades, worries about global growth, and the death of the North Korean leader combined to turn investors away from riskier cyclical sectors.

The defensive STOXX Europe 600 Food & Beverage index sector was the main outperformer in Europe, while more cyclical oil stocks, whose performance is correlated to economic growth, were the worst performers. The STOXX Europe 600 Basic Resources index fell 0.5 percent.   Continued...