NEW YORK (Dow Jones)--Lingering concerns about the fiscal health of weaker nations in the euro zone kept the common currency near an eight-month low against the dollar Monday.
Pressure on the common currency showed no signs of letting up after data indicated that bets against the euro in the futures markets reached record highs. A meeting of finance ministers of the Group of Seven leading economies in Canada over the weekend did little to shift the negative sentiment on the euro.
Data from the Commodity Futures Trading Commission indicate a record amount of bets against the euro--called shorts--among speculators using futures contracts, said Camilla Sutton, currency strategist at Scotia Capital in New York.
Speculative bets against the euro are now at a higher level than at the peak of the financial crisis in 2008, she said, at $7.6 billion as of last Tuesday, the most recent day the weekly data were compiled.
Because the euro has slipped further since then in daily trading, bets in futures markets against the euro have likely increased, Sutton said.
"The data just really reflect how negative sentiment has turned" against the euro, Sutton said. "Very quickly, we've not only gone from" bets in favor but "to record bets against the euro."
The euro will remain under significant pressure until euro-zone officials detail to markets how they will deal with weaker member states. Until then, uncertainty will reign, Sutton said, keeping the euro depressed.
Late afternoon Monday in New York, the euro was at $1.3659 from $1.3663 late Friday, according to EBS via CQG. The dollar was at Y89.30 from Y89.38, while the euro was at Y121.97 from Y122.14. The U.K. pound was at $1.5598 from $1.5613. The dollar was at CHF1.0722 from CHF1.0729.
The Dollar Index, which tracks the U.S. currency against a trade-weighted basket of currencies, was 80.350 from 80.323.
As a result, Deutsche Bank's PowerShares US Dollar Index Bearish (UDN) exchange-traded fund was up 0.04% from late Friday, while its PowerShares US Dollar Index Bullish (UUP) was down 0.04%. The two exchange-traded funds are based on Deutsche Bank currency futures indexes, whose composition mirrors that of ICE's Dollar Index.
To see the euro's moves against the dollar, please see chart at:
http://www.dowjoneswebservices.com/chart/view/3407
In the absence of major economic data, currencies traded within hair-thin ranges and the underlying malaise in the euro zone was still the overriding factor driving currencies Monday.
"The sentiment is still bearish for the euro and positive for the dollar," said Carol Hurley, senior market strategist at brokerage firm Lind-Waldock in Chicago. "The comments from the G-7 put some stabilization into the markets...but lacked substance as far as a formal plan to fix some of these debt issues, so the market is still searching for safety.
A statement from euro-zone members of the G-7 finance ministers--that they would "continue to monitor" Greece's implementation of a belt-tightening plan--didn't ease investor worry over sovereign debt, analysts said.
"Debt concerns in the euro zone seem set to persist and [to] undermine the euro," said Steve Barrow, head of G10 strategy at Standard Bank in London.
The G-7 finance ministers from the leading industrialized economies disappointed hopes of a new initiative for resolving the problem of large budget deficits in peripheral euro-zone countries.
Instead, nothing new was said on the matter. European officials once again suggested that a bailout isn't on the European Union's agenda.
"The seriousness of the European crisis is certainly graver than the Dubai World crisis," said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Conn. "To an extent, this panic has become embedded in the markets' expectations. What remains to be seen is how the Greek public deals with [the country's budget-deficit plan]."
Some unions in Greece have threatened to protest budget-cutting plans. Meanwhile, a measure passed in Portugal on Friday to extend the spending powers of its regional governments unnerved markets.
Investors also cast nervous eyes to sterling, which had been under earlier pressure before rebounding along with the euro in late-morning trading because of fiscal issues in the U.K., including high deficits and the possibility of political gridlock if upcoming elections result in a hung Parliament, as recent polls suggest is increasingly possible.
A hung Parliament, in which one party doesn't have a clear majority, could mean that the slim budgets that are necessary to cut U.K. deficits will have a hard time getting passed, said Altaz Dagha, currency strategist at Lloyds TSB in London.
The Bank of England's announcement last week that it wouldn't extend its bond-buying program, known as quantitative easing, but would leave the door open to future purchases, would continue to weigh on sterling, analysts said.
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