Euro Slips against Greenback on Higher Treasury Yields/Eurozone Worries

By: Barbara Zigah

The common currency Euro slipped against the U.S. Dollar in Asian trading today as higher yields on 10-year U.S. Treasury bonds continue to boost the greenback. The yield on the 10-year Treasury struck 3.36%, the highest in nearly 6 months; one strategist cautioned however that the 10-year yields were not an appropriate gauge of the economic recovery as they may be influenced by long-term worries over the budget deficit, and that the 2-year yield, which rose to .67%, was a better gauge.

Continuing Eurozone debt issues also continue to play against the value of the Euro, and market players expect that the December low of $1.2969 will be re-tested soon. As reported at 12:23 p.m. (JST) in Tokyo, the Euro traded against the greenback at $1.3193 on the EBS trading platform, a decline of .3%. One Canadian trader noted, however, that if Euros were too heavily shorted it’s possible that a short-covering rebound could take place.

Later this week, leaders from the European Union will be meeting to discuss fiscal policy and hopefully find a resolution to the escalating debt problems plaguing the Eurozone nations. However, France and Germany’s continued rejection of calls for an increase in the size of the E.U./IMF rescue fund or for the issuance of joint sovereign bonds will likely keep pressure on the common currency, and leave investors doubtful of a quick solution because of the apparent absence of E.U. cohesiveness.