The euro steadied Monday, trading little changed against the dollar after sliding to a 16-month low Friday, as the market tried to sort out the ramifications from Friday's euro-zone sovereign-rating downgrades.
The euro was at $1.2673 in midday New York trading, compared with $1.2677 late Friday in New York. The common currency was trading at ¥97.296, down from ¥97.70. The dollar was trading at ¥76.75 from ¥76.96. Sterling was at $1.5335 from $1.5317.
Investor confidence remained fragile after the downgrades and in light of Greece's rocky negotiations with international creditors to restructure its debt and stave off default.
The euro traded as low as $1.2626 in Asian hours before rebounding, while against the yen it touched a fresh 11-year low in early Asian trade of ¥97.03 before gently recovering.
Trading conditions were quiet, with U.S. markets mostly shut for Martin Luther King Jr. Day, European equities higher and euro-zone sovereign-debt markets in a calm frame of mind.
"We expect the euro to remain under downside pressure as the latest round of downgrades to sovereign ratings in [Europe]…will likely trigger a further adjustment to international investor portfolio holdings of European assets," said Morgan Stanley in a note to clients.
Also weighing on traders' minds were reports of discord between Greece and its creditors.
"Greece is definitely coming back on the agenda, as negotiations with its private-sector creditors are in a crucial stage," said Ian Stannard, a currency strategist at Morgan Stanley in London. Greece's prime minister expressed confidence Monday that talks would continue, after they stalled Friday. If no deal is reached, Greece will need billions of euros in additional aid to help make major bond repayments due in March.
The wider implications of Friday's downgrades in Europe were also being digested, with the sovereign-backed European Financial Stability Facility's borrowing costs nudging higher ahead of Tuesday's scheduled treasury bill sale by the bailout fund. S&P put the EFSF's triple-A rating on credit watch negative last December.
"[Given] the scale of downgrades from S&P on Friday it would appear inevitable that at some point the EFSF will also lose its AAA rating as well," the Bank of Tokyo Mitsubishi-UFJ said in a note.
read more: Olympus Wealth Management
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