The common currency edged higher in Asian trading today after striking a 2-week trough yesterday, but analysts say that gains were capped as hopes that the upcoming E.U. summit could offer any positive outcome were dashed. Investors had been hopeful that the proposal for a joint Eurobond would be kept alive; the plan had gotten support from several key proponents including France’s Francois Hollande and the IMF Chief Christine Lagarde, but German Chancellor Merkel remains steadfast in her resolve that there will be no joint Eurobond for, as she put it, “as long as I live.”
Analysts are so sure that there will be no positive outcome that would support any long term gains that they are forecasting the possibility of the EUR/USD breaking through $1.20 by the end of 2012. For now, though, the pair is holding steady; as reported at 1:18 p.m. (JST) in Tokyo, the Euro was trading at $1.2503, a 0.1% gain and off the Tuesday low of $1.24413. The Euro also held steady against the Japanese Yen, trading at 99.34 Yen, following a 2-week low struck yesterday when it hit 98.74 Yen.
Meanwhile, the U.S. Dollar fell against the Japanese currency, dropping to 79.44 Yen, well off the 2-month peak struck on Monday. Currency strategists say that political uncertainty in Japan might weigh on the safe haven currency; the Japanese Prime Minister is facing the possibility that his party could split and might have to face a snap election as a controversial and unpopular tax increase works its way through the Japanese Parliament.