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Euro ends four-day slide with modest gains

NEW YORK: The single European currency edged higher against major currencies on Tuesday, snapping a four-day slide, as a sell-off of US bonds and blue-chip US stocks pressured the dollar.

The dollar climbed against the yen, rebounding from losses suffered on Monday, as weak Japanese stocks hurt the yen and traders kept the pair within well-worn ranges ahead of this weekend's meeting of the Group of Seven leading industrialised nations.

Traders said currency trading was subdued on Tuesday with little news for the market to absorb, leaving dealers looking to US asset markets and data releases due later in the week for direction.

"The Dow fell off pretty decently. It's been a pretty quick move down from $1.04 so some short-term euro/dollar bears were getting stopped out," said Dennis Heidt, chief foreign exchange dealer at Paribas in New York.

The euro plumbed lows near $1.0075 early in New York trading before the market turned around amid a bout of profit-taking.

The European currency then tested overnight highs near $1.0140, but found little momentum, and settled at $1.0128, a 0.13 percent gain on its Monday New York close.

"We're not breaking into new ground here," said trader Grant Wilson at Mellon Bank.

The euro also turned around against the yen, gaining more than 1 percent on the day after hitting two-week lows on Monday.

Overnight, the euro had rallied to a high at $1.0140 on short-covering amid talk that Germany's Ifo survey of December business conditions could be stronger than expected.

But it later pared gains in choppy trading after the Ifo institute said it was still compiling the data for its December survey, due Thursday. "Now the market wants to wait until the numbers are released," said Lee Ferridge, head of global currency strategy at Rabobank in London.

"But the risk is still that the Ifo would be strong. If the Ifo is better than expected, the euro should bounce as far as $1.02 but there wouldn't be a shift in sentiment. However, before that, the sentiment for the euro is negative and it could fall to $1.0050."

After rising from just above parity to the dollar at the start of the year to a high of $1.0414 on Jan. 6, sentiment has again soured on the euro as evidence of continued robust, non-inflationary US economic growth has lifted US assets and the dollar.

But jitters over the US interest rate environment have traders closely watching US asset performance.

The yield on the benchmark 30-year US Treasury bond soared to a 2-1/2 year high on Tuesday, hurting US financial stocks. The Dow Jones industrial average closed 1.38 percent lower at 11,561.

"Weaker US asset trade has put a bit of a floor under the euro," said Mike Malpede, senior foreign exchange analyst at Refco Group.

Although the long-term outlook for the euro remained positive, in the shorter-term traders want to see more data to reassure them that the euro zone recovery is firmly in place.

Dollar trade against the yen was very quiet, and the pair pushed to a day high in quiet afternoon trading, tracking the euro's gains on the yen.

Japanese Finance Minister Kiichi Miyazawa said on Tuesday he intended to tell his G7 counterparts this weekend that Japan would act when needed to counter yen strength.

Separately, French Finance Minister Christian Sautter said the G7 would discuss currencies, economic growth and the succession to Michel Camdessus as head of the International Monetary Fund. -Reuters