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Euro weak vs dollar, recovers vs Swiss franc

LONDON - The euro edged up against the dollar in thin, pre-holiday trade on Monday, but it stayed weak and close to recent lows, weighed down by lingering concerns about the fiscal health of Greece.

The single currency recovered against the Swiss franc after tumbling to a nine-month low overnight when traders took advantage of thin liquidity to push it quickly through stops below 1.49 Swiss francs.

Investors have been testing the resolve of the Swiss National Bank after it subtly altered its intervention stance earlier this month, saying it would act only to counter an “excessive” appreciation of the franc versus the euro.

But jitters remain about the chances of intervention. In earlier trade, the franc fell sharply against the dollar and the euro, with traders saying a large dollar/Swiss franc buy order by a commercial bank triggered unconfirmed talk of SNB action.

The SNB and Bank for International Settlements, which has acted for the SNB in the past, declined comment.

“Euro/Swiss has reached quite low levels and it could be an indication that the SNB is not targeting specific levels as such,” said Sverre Holbek, Danske Bank strategist in Copenhagen.

“This may allow the currency to slip a bit further than we’ve seen previously, but we still don’t think they are ready to abandon their intervention in the currency market just yet.”

At 1240 GMT, the euro was steady at 1.4939 francs. It had earlier crashed through stops below 1.4900 francs to hit a nine-month low of 1.4826 on trading platform EBS.

Against the dollar, the euro edged up 0.1 percent at $1.4354 , helped by rising European shares, but it stayed close to Friday’s low of $1.4262 on EBS, its weakest since Sept. 4.

The euro has fallen sharply from levels above $1.50 as recently as Dec. 4, pressured by concerns about the fiscal health of some countries on the euro zone periphery following recent rating agency downgrades on Greek debt.

The European Commission said on Monday the euro was overvalued and that its further appreciation could hit the more open economies in the euro zone.

Meanwhile, solid figures on the U.S. job market and retail sales earlier this month have prompted talk the U.S. economy may recover faster than the euro zone.

“It looks like we may be seeing better growth prospects in the U.S. than the euro zone. Better employment and retail sales data in the U.S. has raised the possibility of a cyclical recovery in 2010,” ING currency strategist Chris Turner said.

Dollar momentum to continue?

The dollar index, which measures its performance against six other major currencies, dipped 0.2 percent to 77.665, though it was still not far from a more than three-month high of 78.141 hit on Friday.

Ahead of the year-end, the dollar has been supported as investors cut back on short dollar positions, though some traders said the U.S. currency’s gains could begin to slow as many of these positions have already been neutralised.

U.S. Commodity Futures Trading Commission data on Friday showed speculators cut bets against the dollar to their lowest in more than 10 months in the week ending Dec. 15.

“It will be key to see what happens when the calendar turns to 2010 to see if we see a build-up in long dollar positions,” Holbek said, adding there had been no sign of this so far.

“We don’t see that because it still is a very low-yielding currency and we have no indications from the Fed that they are going to change their quite dovish stance just yet”.

The higher-yielding Australian dollar fell 0.6 percent against the U.S. dollar to $0.8857, close to a 10-week low hit on Friday as market players continued to scale back expectations for how high Australian rates will rise next year.