FOREX-Ireland downgrade hits euro, dollar extends rally... |
"The euro was under pressure after last weeks dollar bounce and the downgrade puts further pressure on it now," said Geraldine Concagh, economist at AIB Group Treasury in Dublin.
The euro fell as low as $1. 3806, according to Reuters data, and was last down 0. 7 percent for the day at $1. 3875. Against the yen, the euro was down 0. 8 percent at 136. 70 yen.
Technical strategists at Citigroup said fairly strong euro support lies in the $1. 3722-$1. 3793 area, "which should hold at least on the first attempt. "
An index that gauges the dollars value against six major currencies hit its highest level since May 20. On Friday, it rose 1. 6 percent, the indexs best performance since Dec. 19, Reuters data showed.
The dollar slipped 0. 1 percent against the yen to 98. 53 yen, still close to Fridays one-month high of 98. 90 yen on trading platform EBS.
5973. Earlier, it fell to $1. 5803 after support for Prime Minister Gordon Browns ruling Labour Party in European elections plunged to its lowest level in a century, adding uncertainty about his political future.
Sterling was barely changed at $1.
Even before Irelands downgrade, the dollar was buoyed by investors focus on improving prospects for the U. S. economy, reversing a trend where the dollar had been sold for higher- risk currencies in response to better economic fundamentals.
The pace of U. S. job losses slowed sharply last month, the strongest sign to date that the recession is diminishing, even as the unemployment rate hit its highest in nearly 26 years.
The spike in two-year note yields forced more investors to unwind bets against the U. S. currency as some analysts said the dollars earlier slide had been excessive. Two- and 10-year U. S. Treasury yields hit their highest levels since November in Asia on Monday as Treasuries extended losses.
Chuck Butler, president of Everbank World Markets in St. Louis, said, "The rise in bond yields has people looking ahead, thinking the Fed is probably going to be finished with its near-zero interest-rate policy by next year. "
That view was reinforced when Atlanta Fed President Dennis Lockhart said on Friday the Fed needs to be "anticipatory" and not wait too long before tightening policy.
However, Dennis Gartman, an independent investor and author of The Gartman Letters, said investors were jumping the gun.
"We shall mince no words here: This is not going to happen," he said, adding that the Fed wont move until certain the recession is over and the jobless rate has stopped rising.
With currency movements closely following U. S. bond yields, markets will focus on a slew of Treasuries auctions this week. The U. S. government is scheduled to sell $65 billion in debt, including 10-year and 30-year secur.
FOREX-Ireland downgrade hits eur