Euro tentatively off two-month lows on Irish aid

By Ian Chua and Gyles Beckford

SYDNEY/WELLINGTON (BestGrowthStock) – The euro recouped some losses early in Asia on Monday after the European Union threw an 85 billion euro ($115 billion) lifeline to debt stricken Ireland, and outlined a system to resolve Europe’s debt crisis.

But already, the euro was off session highs. A key point for investors is whether the EU has done enough to stem fears from spilling over to other euro zone members like Portugal, a problem not resolved after Greece was bailed out earlier this year.

“It’s just position squaring from a few shorts taken on Friday. The package is pretty much what most would have anticipated, so it’s not a surprise to anyone. It perhaps removes a little bit of uncertainty,” said Greg Gibbs, strategist at RBS in Sydney.

“But it doesn’t really change the real fear the market has that this could spread beyond Ireland to Portugal and Spain.”

The euro shot up one full cent to around $1.3345 in thin trade before quickly relinquishing most of those gains to last trade at $1.3273. That compared with $1.3240 in late New York trade on Friday, when it plumbed a two-month low of $1.3200.

Technically, the single currency remained on a precarious footing, having smashed through crucial support at $1.3333, a level that will now act as resistance.

Against the yen, the euro climbed to around 111.80 yen, from 111.34 yen late on Friday, before edging back to 111.51 yen.

“There’s absolutely no indication that the agreed package for Ireland is going to soothe those concerns stemming from the Iberian peninsula,” said Philip Shaw, chief economist at Investec.

Ireland said the emergency loans would run for an average of 7.5 years, and EU Monetary Affairs Commissioner Olli Rehn said the final interest rate would likely be about 6 percent, slightly lower than what some had feared.

EU finance ministers also approved the broad outlines of a permanent crisis-resolution mechanism, in which private bondholders could be made to share the burden of restructuring of a euro zone country’s sovereign debt bought after 2013.

With the euro staging a tentative rebound, the dollar came off its highs. It was down 0.2 percent against a basket of major currencies to 80.227 (.DXY: ), but still within easy reach of a two-month high of 80.522 set on Friday.

Against the Japanese currency, the dollar was little changed from late New York levels at 84.03.

Commodity currencies such as the Australian dollar also rose, tracking gains in the euro. The Aussie dollar climbed as high as $0.9712 from $0.9628, before last trading at$0.9672.

Investors were also keeping a close eye on developments in the Korean Peninsular, where China has called for emergency talks to resolve the crisis between North and South Korea.

This is likely to keep the South Korean won on edge. The dollar jumped to a high of 1,164.10 won last Friday from a session low of 1,135.70 as investors again dumped the won. Before tensions flared up, the dollar traded at lows around 1,105.

(Editing by Wayne Cole)

Euro tentatively off two-month lows on Irish aid