FOREX-Debt worries dent euro before Eurogroup meeting

* Euro down, wins little respite from LCH.Clearnet move

* Euro zone finance ministers meet later on Monday

* Market unperturbed by Bernanke saying may buy more assets

(Adds quote, details, updates prices)

By Anirban Nag

LONDON, Dec 6 (BestGrowthStock) – The euro fell (Read more about the trembling euro. ) on Monday on worries
about euro zone peripheral government debt, ahead of a meeting
of finance ministers who are under pressure to boost the size of
a rescue fund to stop a debt crisis spreading.

IMF chief Dominique Strauss-Kahn will present a report, a
copy of which was obtained by Reuters, to euro zone finance
ministers meeting in Brussels, saying more action is needed from
member states. [ID:nLDE6B40CZ]

However, analysts said there were concerns about differences
of opinion among officials.

This encouraged renewed selling of the euro after a rebound
late last week took it back above $1.34, with traders citing
selling by real money accounts and sovereign names.

The dollar also bounced on a bout of short covering as
investors shrugged off comments from U.S. Federal Reserve
Chairman Ben Bernanke that quantitative easing could be bigger
than estimated. [ID:nN05271909]

“The headlines over the weekend still spoke of a lack of
unity in thinking,” said Simon Derrick, head of currency
research at Bank of New York Mellon. “It doesn’t do a great deal
to encourage investor confidence if there are very public
differences of opinion”.

Germany denied on Saturday a British newspaper report that
Chancellor Angela Merkel warned Berlin might leave the euro
during a heated exchange at a summit of European Union leaders
at the end of October. [ID:nLDE6B3044]

The euro (EUR=: ) was down 0.9 percent at $1.3299, having hit
a low of $1.3249, according to Reuters data, with stop-loss
selling triggered on a break below $1.3270. Traders reported an
options expiry on Monday at $1.3250.

The euro briefly rose to $1.3380 after European clearing
house LCH.Clearnet reduced the margin requirement on Irish
government bonds to 30 percent from 45 percent of net positions
of its margin rate. [ID:nLDE6B10EI]

But peripheral bond yields — such as Spain’s and Portugal’s
— nudged higher after being kept in check last week by European
Central Bank bond buying [GVD/EUR] and the euro soon moved back,
dropping below its 100-day moving average at $1.3333.

Euro/dollar risk reversals showed the premium demanded to
buy euro puts over calls rising again as the recovery in the
spot euro above $1.34 looked to have run its course. The
25-delta 1-month risk reversal (EUR1MRR=ICAP: ) traded above 2.0
on Monday after falling to around 1.85 on Friday.

Euro/dollar “has scope to move down further, with political
developments and commitment from euro zone policymakers likely
to be the focus,” said Paul Mackel, director of currency
strategy at HSBC.

The IMF report will say the euro zone should increase the
size of its 750 billion euro rescue fund and the European
Central Bank should boost bond buying markedly. [ID:nLDE6B40CZ]


With the euro resuming its decline, the dollar index (Read more about the global trade. ) (.DXY: )
was up 0.5 percent at 79.741, close to its 100-day moving
average of 80.04.

Analysts and traders said Bernanke’s comments on QE were not
too bearish given Friday’s below-forecast jobs data.

“Most of the other U.S. data we’ve seen has only been
strong, and is likely to get the market speculating in the other
direction,” said Ian Stannard, senior currency strategist at BNP

Latest data from the Commodity and Futures Trading
Commission showed currency speculators trimmed bets against the
U.S. dollar for a fourth straight week. [IMM/FX].

The dollar was up 0.3 percent to 82.85 yen (JPY=: ), climbing
off Friday’s three-week low of 82.52 yen and keeping well above
the Ichimoku ‘cloud’ bottom around 81.70 yen.

(Additional reporting by Jessica Mortimer and Anna
Yukhananov; editing by Nigel Stephenson)

FOREX-Debt worries dent euro before Eurogroup meeting