Forex: Weekly’s review

On Monday the euro dropped more than 1 percent versus the dollar and yen as Italy’s borrowing costs increased at a five-year note sale, stoking concern its new government will struggle to contain debt turmoil. Italy’s Treasury auctioned 3 billion euros ($4.1 billion) of September 2016 notes, the maximum target. The yield was 6.29 percent, up from 5.32 percent at the previous auction and the highest since June 1997. Demand rose to 1.47 times the amount on offer, from 1.34 times last month. The franc snapped a two-day gain versus the dollar, sliding to 90.86 centimes versus the dollar, after the Federal Statistics Office said producer and import prices decreased 1.8 percent last month from a year earlier. Swiss National Bank President Philipp Hildebrand is proving intervention in foreign-exchange markets can succeed as speculators bow to his decision to cap the franc against the euro as he seeks to stave off the threat of deflation.

On Tuesday the euro fell to a one-month low against the yen as European bond yields surged at auctions and Mario Monti, Italy’s premier-in-waiting, faced resistance to forming a cabinet. The 17-nation currency slid below $1.35 as Italy’s 10-year yields surpassed the 7 percent threshold that prompted other nations to seek bailouts. Italian 10-year yields climbed as high as 7.07 percent after rising to a euro-era record of 7.48 percent on Nov. 9. The dollar got a boost as Federal Reserve Bank of Dallas President Richard Fisher said he sees decreasing odds the central bank will need to ease policy further on signs the U.S. economy is poised for growth. U.S. retail sales rose in October more than forecast, and manufacturing in the New York region unexpectedly expanded this month, reports showed.

On Wednesday the euro against the dollar shows a high volatility. The euro reached a five-week low against the dollar and the yen amid growing fears of investors about the ability of European countries to cope with the debt crisis. Yields on ten-year Italy at auction on Wednesday fell by 29 basis points - to 6.79%, the papers in Spain - 9 points - to 6.25%. The British pound fell against the dollar after the Bank of England lowered forecasts for economic growth and inflation, as expected, signaling the introduction of a new fiscal stimulus in coming months. As the market was ready for such statements, the pound was able to hold their positions.

On Thursday the euro rose against the majority of its most-traded counterparts as Italian bond yields reversed course and fell, easing concern the region’s third-largest economy will be unable to handle its debt crisis.The 17-nation currency gained from the lowest in five weeks versus the dollar and the yen as two people with knowledge of the trades said the European Central Bank bought more Italian government bonds, following purchases earlier. The euro fell earlier as Spanish and French borrowing costs rose at auctions.The pound strengthened against the dollar, snapping a three-day decline, after British retail sales unexpectedly rose in October.

On Friday the euro strengthened for the first time in a week against the dollar and yen amid speculation European Central Bank buying of Italian and Spanish bonds will stem surging borrowing costs in the region.Europe’s shared currency rose from yesterday’s five-week low versus the yen amid reports the ECB may start talks to lend to the International Monetary Fund for sovereign bailouts. Italian bonds rose. ECB President Mario Draghi today slammed governments for failing to implement policy commitments as holders of Greek debt began talks in Athens on structuring a 50 percent writeoff that was the cornerstone of a deal reached last month. The accord, which finance ministers aim to implement next month, was at least the fourth plan billed as a comprehensive strategy to end the crisis born in Greece in 2009, none of which provided a lasting fix.