Wednesday, May 12, 2010

FOREX-Euro slips on nagging debt worry, GBP holds gains

Kaori Kaneko, 1:58, Wednesday 12 May 2010
* Near term target for euro at around $1.2580

* Sterling holds gains, market eyes new govt's moves on debt

* Advances in stocks help higher yielders vs yen.

TOKYO, May 12 (Reuters) - The euro slipped on Wednesday on nagging worries about the euro zone's ability to tackle its debt crisis, while sterling held gains after a new coalition UK government was formed.

Conservative party leader David Cameron took over as British prime minister after securing a power-sharing agreement between his centre-right party and the smaller Liberal Democrats. [ID:nUKVOTES]

Market players said they were keen to see if the Conservative-led government will take swift action to bring down spending.

The euro remained under selling pressure with investors still sceptical about the euro zone economies' ability to deliver the drastic spending cuts and tax increases needed to get their fiscal houses in order.

"The euro's gains were short-lived as the fundamental debt problems in Greece and some other nations in the euro-zone have not been solved and severe conditions will likely continue," said a trader at a Japanese bank.

"Investors cannot become optimistic and they are not yet ready to fully take on risk trades," he said.

The euro was trading around $1.2636 , down 0.2 percent from late U.S. trade on Tuesday, having retreated from Monday's high near $1.3100. One near-term downside target for the euro may be around $1.2580, near Friday's low, the trader said.

Sterling slipped 0.2 percent to $1.4888 after rising above $1.5000 on Tuesday. The euro edged up 0.2 percent against sterling to 84.84 pence after falling more than 1.5 percent on Tuesday.

A drop below 84.28 pence would take the euro to its lowest in 11 months against sterling.

Initial gains in Tokyo shares helped higher-yielding currencies against the yen with the Australian dollar rising 0.2 percent to 83.13 yen .

The dollar rose 0.2 percent to 92.86 yen. (Editing by Edwina Gibbs)

No comments: