Euro closes in on two-week lows

The euro sat on the defensive close to a two-week low versus the dollar on Tuesday due to increasing concerns that this week’s European summit would come up with no solutions to the bloc’s debt crisis.

The risk-averse mood contributed to a sharp rise in the Japanese yen following a two-month low versus the greenback, although the currency may be effected by political uncertainty in the country as Japanese Prime Minister Yoshihiko Noda could face opposition against his tax increase plan.

The euro dropped to $1.24713 at one stage on Monday, the lowest it has been since 12 June and it was last seen at $1.2507, nearly flat from late trading in the US. Support was said to be around the 12 June low of $1.2443, at which and below large bids were detected, but a break beneath that level is likely to the two-year low hit on 1 June of $1.2288.

Meanwhile, German Chancellor Angela Merkel put an end to any fading hope in financial markets that Europe may issue common eurozone bonds in order to help indebted nations, by describing such an idea as “counterproductive” and “economically wrong”.