By: Barbara Zigah
In early Asian trading, the Euro edged up against the U.S. Dollar, but investors, who have increased their long-term holdings in the common currency, appear to believe that a decline in the short-term will prevent it from breaching the November peak. As reported at 2:38 p.m. (JST) in Tokyo, the Euro was trading against the greenback at $1.3981, a gain of .1%, but slightly off the 4-month peak struck yesterday. In the past three weeks, the Euro has gained nearly 4% against the U.S. Dollar, but analysts suggest that this week’s E.U. summit will help to define the common currency’s direction. Medium term support for the Euro is currently seen in the $1.3840 - $1.3860 range.
In recent days, the Euro’s gains have been on the back of the hawkish tones coming from the ECB policy setting council, which strongly hinted at the possibility of an April interest rate hike. One possible threat to the Euro is again coming from the Eurozone’s fiscally troubled states. Yesterday, the ratings agency, Moody’s significantly lowered Greek sovereign debt, and left open the option for further downgrades. This has put renewed pressure on the European Union to come up with a cohesive and relevant rescue package to stem the contagion of the debt crisis.