By: Barbara Zigah

The Euro struck a 16-month trough against the U.S. Dollar in Asian trading as negative headlines out of the Eurozone weigh. As reported at 11:19 a.m. (JST) in Toyo, the Euro was trading 0.2% lower at $1.2694, recovering from an earlier struck low of $1.2666 struck on the EBS trading platform. The common currency also fell to an 11-year low versus the Japanese Yen, trading at 97.28 Yen before recovering slightly to 97.65 Japanese Yen, still a loss of about 0.3%. One FX strategist said that his firm had revised downward their forecast for the Euro-Dollar to 1.25, as well as all of the Euro-crosses. The bearish sentiment is likely to continue; according to the CFTC, short positions in the Euro hit a record level for the first week of January.

Over the weekend, one German news magazine reported that the IMF was quickly losing confidence in Greece, believing that the government would ultimately be unable to work through its massive problems. Indeed, markets will be focusing this week on debt sales from two of the Eurozone’s troubled sovereigns, specifically the Spanish sale on Thursday and the Italian sale on Friday. Both will be closely monitored, with a view to gauging investors’ acceptance of the respective governments’ efforts to address their fiscal problems.