FOREX-Euro stabilises but stays weak on debt worries

* Euro flat vs USD, off earlier 4-yr low; still below $1.20

* Euro zone debt, Hungary concerns spark retreat from risk

* Dlr, yen and Swiss franc gain on safety bids

(Updates prices, adds quote))

By Jessica Mortimer

LONDON, June 7 (BestGrowthStock) – The euro recovered on Monday from
an earlier slide to a four-year low versus the dollar, but
fiscal troubles in Hungary reminded investors of the scale of
Europe’s debt problems and weighed on the single currency.

After a drop of around 1.5 percent versus the dollar on
Friday followed by more selling early on Monday, traders said
investors were wary of pushing the single currency much lower,
although sentiment remained negative.

Weaker-than-expected U.S. jobs data on Friday sparked
concerns about global economic health, and Group of 20 finance
ministers at the weekend highlighted the need to cut deficits as
well as the need to safeguard a fragile recovery. [ID:nTOE65401K]

Concerns about public finances in Hungary — a member of the
European Union, though not the euro zone — added to maket
jitters after comments last week by government officials that
Hungary could face a Greek-style crisis. [ID:nLDE6550I7]

Analysts said this reignited concerns about whether
peripheral euro zone countries will be able to deliver tough
austerity measures, and worries about European banks’ exposure
to Hungary.

“Euro/dollar is heading lower on a combination of the
Hungary situation and the U.S. jobs data, though it’s come an
awfully long way in recent days and it won’t head lower in a
straight line,” said RBS currency strategist Paul Robson.

At 1002 GMT, the euro (EUR=: ) was steady at $1.1974, having
fallen as low as $1.1876 on the EBS trading platform, its lowest
since March 2006.

Traders say the next option trigger is at $1.1850 and the
likely target at $1.1825, the euro’s March 2006 low. Below that,
traders saw little support until its November 2005 low of
$1.1638, though the euro’s 1989 launch level of $1.1747 was also
a potential key marker.

Data on Friday showed speculators cut net short positions on
the euro in the week to June 1 to a still-high 93,325 contracts
from 106,736. [IMM/FX]

For a graphic of European banks’ exposure to Hungary click

For a graphic on CTFC futures positioning, click

The euro’s weakness helped the U.S. dollar index (Read more about the global trade. ) (.DXY: )
earlier to a fresh 15-month high of 88.708, eyeing the 2009 high
of 89.62, though it later pared gains to trade flat at 88.255.


The euro extended a slide begun on Friday, with market
players saying its close below $1.2135, the 50 percent
retracement of its 2000-2008 rally, was a bearish signal.

A lack of any expression of strong concern at a meeting of
G20 finance ministers over the weekend or from euro zone
policymakers after the euro’s steep fall on Friday encouraged
further euro selling, traders said. [ID:nSGE656024]

Data on Friday reinforced views the U.S. economic recovery
may be slow [ID:nOAT004640], sparking a fresh bout of risk
aversion which pushed European stocks (.FTEU3: ) down on Monday
and broadly benefited the yen, dollar and Swiss franc.

The euro fell (Read more about the trembling euro. ) 0.3 percent to 109.64 yen (EURJPY=R: ), having
earlier hit an 8-1/2-year low of 108.06 yen on EBS.

“The worries about Hungary came at a time when the market is
really sensitive to any negative economic news and it has
affected risk sentiment all over the world,” said Elisabeth
Andreew, currency strategist at Nordea in Copenhagen.

Concerns about Hungary’s debt caused the cost of insuring
against default in France and several peripheral euro zone
sovereigns to rise on Monday. [GVD/EUR]

Investment Analysis

(Graphics by Scott Barber, additional reporting by Satomi
Noguchi in Tokyo)

FOREX-Euro stabilises but stays weak on debt worries