Euro rebounds against dollar ahead of meeting

The euro crept higher versus the dollar yesterday as traders took some respite after seeing the single currency fall to a four-month low, while a much-anticipated meeting of eurozone leaders is due this week.

Traders said they had seen signs of exhaustion in selling the common currency. That, as well as extreme levels of the short positioning of the euro, which hit a record last week, indicated a short-term rebound. However, any recovery was likely to be short-lived because of ongoing concerns about Greece, despite world leaders expressing support for the country to remain in the euro at a meeting over the weekend. If Greece was to exit, there would be widespread concern that other struggling eurozone economies could do likewise.

Focus is now turning to Wednesday’s EU summit, in which newly-elected French President Francois Hollande is likely to express his support for mutualised European debt, something that Germany is strongly against. New York-based Brown Brothers Harriman currency strategist Mark McCormick said that the euro is vulnerable to a short-term bounce, but that it’s mainly related to positioning adjustment as well as some technical exhaustion.

The single currency last stood at $1.2817, after climbing to as high as $1.2824, almost two cents above the low on Friday of $1.2640. So far in May, it has dropped by over three per cent.