Euro steadies in thin holiday trade

By Ian Chua

SYDNEY (BestGrowthStock) – The euro held its ground against the Swiss franc early in Asia on Friday after having staged a rebound overnight in what traders said was a correction following a series of record lows this week.

But little action is expected in Asia with volumes likely to dry up heading into the Christmas break. U.S. markets are shut on Friday along with many European centers.

“In this type of market condition, it’s very hard to take a position because you’ll just get whipped out and that’s why there are hardly any orders. People are waiting for January when liquidity returns to work out what they want to do,” a trader at a U.S. investment bank said.

“The euro is still a sell-on-rally trade. Anything above $1.32 is worthwhile selling in my view and probably there won’t be any buyers until the low $1.30s, where we could see some Asian central bank interest.”

The single currency was last at $1.3115, off three-week lows around $1.3053 set overnight. Versus the Swiss franc, it was at 1.2571, having bounced off an all-time low around 1.2440 set this week.

“The moves in EURCHF were quite significant but it was largely due to short covering, reversing the lower EURCHF trend,” BNP Paribas analysts wrote in a client note.

Indeed, with no resolution in sight for the euro zone debt crisis, analysts said it’s only time before the market took the euro lower.

Portugal was the latest euro zone member to have its ratings cut, with Fitch downgrading the country’s credit rating by one notch to A-plus with a negative outlook. France, however, secured a thumbs up from S&P, which affirmed its AAA rating.

Some traders, however, said there was scope for a significant short squeeze in the euro in the short term, given the downside momentum appeared to be waning. A breach of $1.3200 could trigger a move back toward the December 17 high around $1.3360.

The dollar was at 83.03 yen, having hit 1-1/2-week lows around 82.83 overnight. It was near the bottom-end of a wider range roughly between 82.40 and 84.40 seen since late November.

In contrast, the Australian dollar has been going from strength to strength this week, hitting six-week highs at $1.0067 overnight. It was last at $1.0020 and expected to hold in a thin range around $1.0000 and $1.0060 on the day.

Traders said interest from real money accounts looking for exposure to high yields and the upbeat commodities story was helping to shore up the Aussie.

Crude oil hit two-year highs above $91 a barrel, while copper held near the record high set earlier in the week, underpinned by more evidence the U.S. economy was strengthening.

Euro steadies in thin holiday trade