European Debt Crisis Remains In Focus, Major Currencies Stable

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The FINANCIAL — While the European sovereign debt crisis will continue to be the focus of the foreign exchange market over the coming weeks, the euro remained steady versus the dollar and the yen Monday in Asia amid quiet trading, with the U.S. and U.K. markets closed later in the global day for seasonal breaks, according to Borsa Italiana – London Stock Exchange .


Despite the apparent calm in the market, though, many signs suggest that European sovereign debt problems are far from over.

Italian government bond yields remained at elevated levels at the end of last week, while last Thursday's record use of the European Central Bank's overnight deposit facility reflects ongoing distrust in interbank lending markets. If there are any movements, they could be magnified as trading volume is low, market participants warned.

But a further improvement in U.S. economic indicators, which have shown some signs of firmness in recent weeks, could temporarily draw some attention away from the European sovereign debt crisis, shifting more funds into equity, BBH's Kubo said.

If that happens, risk-averse yen-buying may ease a little, he said.

The euro was at $1.3059 at 0450 GMT from $1.3045 late Friday in New York, according to EBS. The common currency was at Y101.84 from Y101.92.

The dollar was at Y77.99 from Y78.11. The U.K. pound was at $1.5616 from $1.5602. The dollar was at CHF0.9365 from CHF0.9368.

The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at about 79.994 from 79.997.



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