* EUR option barriers at $1.2500; stops at $1.2480
* Break of $1.25 targets June 2010 low of $1.1876
* USD/JPY supported by importers, short-covering
* DXY at its highest since Sept 2010
* Sell-off in Asian currencies weighs on Aussie
By Antoni Slodkowski
TOKYO, May 25 (Reuters) – The euro wallowed at two-year lows
against the dollar on Friday and was poised to end the week two
percent weaker, weighed down by weak German manufacturing data
and worries about a messy Greek exit from the euro zone.
The risk-sensitive Australian dollar dipped 0.2 percent to
$0.9741, coming close to the six-month low of $0.9690
hit on Wednesday as a sell-off in emerging market currencies
picked up steam.
Rattled by worries over lack of growth in the euro area, the
fragile situation of the region’s banking system and a potential
messy Greek exit from the single currency bloc, the euro is
poised to chalk up its biggest weekly loss since the first week
of April.
Macro funds and real money investors have ramped up selling
of the currency, which is now down more than 5 percent in May,
as concerns about Greece leaving the zone rose after an
inconclusive election that heightened the risk of its
bankruptcy.
Greeks are voting again on June 17, with polls showing a
close race between parties supporting and opposing terms of the
its international bailout, keeping markets on tenterhooks.
The euro fetched $1.2535, a stone’s throw from
$1.2516, its lowest level since July 2010 plumbed the day
before. Against the yen, it recovered from a four-month trough
of 99.37 yen to last stand at 99.90.
“The pace of the euro’s fall has been very quick and the
market is looking for a level to consolidate around – it may
well be around 1.25,” said Teppei Ino, currency analyst at the
Bank of Tokyo-Mitsubishi UFJ.
“U.S. markets are closed on Monday, and that too is likely
to prevent traders from any excessive risk-taking,” Ino said.
But with the euro zone economy in dire straits and its
politicians openly talking about a Greek exit, traders said that
the common currency would sooner or later have to yield to the
pressure and pierce the nearest support at $1.2500.
A break of that level would target the June 2010 low of
$1.1876 with not much in the way of technical support this side
of $1.2000. For now, traders cite a formidable option barrier at
$1.2500 with large stop-loss orders looming around $1.2480.
DARKENING PICTURE
Darkening the picture further, European Central Bank data
showed 35.4 billion euros of net direct portfolio investment
flowed out of the euro zone in March, as investors shunned the
region’s assets.
Investor skittishness is well-reflected in the options
market, where euro/dollar one-month at-the-money implied
volatility spiked to 13.13 percent, its highest in
more than four months.
With the euro on the backfoot, the dollar has been the big
winner with its index against a basket of major currencies
edging up to 82.411, its highest since September 2010.
Against the yen, the greenback was 0.1 percent higher at
79.67 yen, supported by Tokyo importers and
short-covering ahead of the long weekend in the United States.
Sell offers around 80.00 yen are poised to cap any further
gains, traders say.
The dollar muscled in on the Korean won 0.2 percent to
1,183.2 won, at one point pushing it to the lowest
level since October last year, and 0.5 percent on Indonesian
rupiah, pressuring it to 9,300 – the lowest level since
May 2010.
“The rupiah is really taking the beating today. More than
repatriation by European banks, I think this is a simple ‘risk
off’ move as investors look for safety in the dollar,” said a
trader for a Japanese bank.
The move is reminiscent of September 2011 when emerging
market positions were slashed en masse as investors lowered
their exposure to the region’s bonds — an asset class that has
until now been resilient to swirling global risks.
Barclays Capital said in a report citing EPFR Global data
that in the week to May 23, emerging markets-dedicated bond
funds saw $478 million in net outflows, the first net
redemptions in 19 weeks.
