ECONOMY

Euro on defensive on yield pressure, Greece concerns

The euro was on the defensive on Monday morning, pressured by the European Central Bank’s stimulus driving interest rates lower in the euro zone and on concerns over talks between debt-strapped Greece and its creditors over more funding for Athens.

The euro traded at $1.0615, flat on the day after having touched a 3 1/2-week low of $1.05670 to post its fifth straight day of losses on Friday.

“We think the euro will fall below parity against the dollar by the end of the year because of the ECB’s easing and low returns on capital in the euro zone,» said Shin Kadota, chief FX strategist at Barclays in Tokyo.

Investors have been dumping the common currency as the ECB’s bond buying since last month has been driving down euro zone bond yields to negative levels in many countries.

Against the yen, the euro stood at 127.30 yen, not far from a 21-month low of 126.915 yen hit last month.

Adding to the pressure on the euro, Greece has been bickering with the euro zone over its reform programme ahead of euro zone finance ministers’ meeting on April 24 to consider more funding for Athens.

A German newspaper reported on Saturday euro zone officials were shocked at Greece’s failure to outline plans for structural reforms at last week’s talks in Brussels.

Data from U.S. financial watchdog showed late on Friday speculators’ net short position against the euro remained near record high.

Their net euro short position stood at 215,258 contracts last week, not far from a record 226,560 contracts set the week before.

The British pound also traded near a five-year low against the dollar hit on Friday following a weaker-than-expected UK industrial output and concerns about political uncertainty after a British election next month.

The pound stood at $1.4641, having hit five-year lows of $1.4588 on Friday.

Against the yen, the dollar was little changed at 120.21 yen, down slightly from late U.S. levels but though it was within its recent trading band between 118 and 122.

In Asian trade, Chinese trade data looms as a potential mover in currency markets. Economists expect exports to have increase 12.0 percent in March from a year earlier while imports are seen falling 11.7 percent.

Ahead of the data, the Australian dollar – considered a liquid proxy for China plays – was trading a tad softer at $0.7667, down 0.2 percent from late U.S. levels last week.

[Reuters]