Euro holds firm on ECB hopes

The euro was resilient on Tuesday with optimism high that the ECB will launch measures to combat the embattled region’s debt crisis this week.

The common currency stood at $1.2584 in early Asian trade, in comparison with $1.2571 recorded in Monday’s late European trade. The currency stayed close to an eight-week high of $1.2638 hit last Friday.

The euro’s resilience was in spite of Moody’s decision to change its outlook for the European Union to negative. The ratings agency changed the EU’s Aaa rating to negative and issued a warning that it could downgrade the region if it opts to reduce the ratings on the bloc’s four biggest budget supporters: Germany, the UK, the Netherlands and France.

However, traders claimed the news came as no surprise and the speculation remained rampant that the ECB would announce details on Thursday of a much-anticipated debt-buying initiative to help support financially embattled countries such as Italy and Spain.

That optimism was boosted yesterday following reports that ECB President Mario Draghi said the ECB buying sovereign bonds with three-year maturities was not classed as state aid. However, analysts warned that with hopes running so high for this week’s meeting, the market could react negatively should the central bank not meet expectations.