The euro had its biggest one-day drop against the yen in seven years as
the deepening credit crisis prompted European governments to pledge
bailouts for troubled banks while stopping short of coordinated action.
The 15-nation currency declined to a 14-month low against the dollar
and the weakest in two years versus the yen after leaders meeting at
the weekend avoided announcing any plan that would mirror the U.S.'s
$700 billion bailout. Germany joined with banks and insurers to prevent
the collapse of property lender Hypo Real Estate Holding AG and Belgium
announced a revised deal to salvage Fortis. The yen jumped 5 percent
versus the Australian dollar as investors cut holdings of higher-
yielding assets funded in Japan, known as carry trades.
``It appears that European governments are failing to grasp the real
problem and are taking reactive measures instead of dealing with the
underlying situation,'' said Ian Stannard, a London-based currency
strategist fro BNP Paribas SA. ``The market is disappointed with the
results out of weekend meetings and that's going to put the euro under
increasing pressure.
Technical analysis shows the euro may fall to $1.3380 this week, said
Kengo Suzuki, currency strategist at Shinko Securities Co. in Tokyo.
The European currency is likely to extend last week's 5.8 percent loss
as its daily moving average convergence/divergence chart is showing a
sell signal, according to Suzuki. Support at $1.3380 is near the euro's
200-week moving average, he said. Support is a level where buy orders
may be clustered.
``There's really not much to suggest the euro can stage a meaningful
recovery right now,'' Suzuki said. ``It's been caught in a wave of
panic selling and the charts show it can go lower still.''
EUR/USD: after consolidation within $1.3600/50 posted session
low at $1.3540, before gained back to $1.3620. Offers remain at
$1.3620. more on approach to
$1.3670/80 (day high and 61.8% of $1.3540-$1.3907 move). Bids spotted
at $1.3535/30, stronger near $1.3500 option barrier.