Euro rangebound against dollar

The euro was rangebound against the dollar in Asia on Tuesday as trading lacked any clear direction, with risk appetite suppressed by eurozone and US debt concerns.

The euro inched down to $1.4090 in Tokyo afternoon trading from $1.4117 in New York late Monday. The European single unit also eased to 111.36 yen from 111.50 yen.

The dollar fetched 79.03 yen, little changed from 79.02 yen.

Prospects remain unclear over the ongoing debate between Democrats and Republicans in Washington over raising the US government's debt ceiling.

The White House has warned that the debt limit must be raised by August 2 to prevent a default, which economists and business leaders warn would have deeply destabilising consequences for the global economy.

But Republicans, whose votes Obama needs to raise the congressionally set limit, have demanded sweeping spending cuts in return while rejecting calls from the White House and Democrats to tie them to tax hikes on the rich and corporations.

Rating agencies S&P and Moody's last week threatened a possibility of lowering their US debt ratings amid the political standoff.

Meanwhile, concern over the eurozone debt crisis continued to undermine sentiment, sending bond markets in peripheral nations lower and beating global stock on Monday.

The persistent uncertainty also saw the yield, or rate of return, paid on Italian and Spanish bonds hit euro-era records, reflecting widespread concern that both countries were now at higher risk and could suffer contagion from the debt crisis.

Italy's 10-year bond yields rose to 6.0 percent Monday, compared with 5.75 percent on Friday, while Spain's rose from 6.05 percent to 6.30 percent.

"While the US debt dispute dragged on the dollar, concerns linger over the eurozone debt crisis even after the stress tests were conducted on Europe's banking system," said Gen Kawabe, dealer at Chuo Mitsui Trust and Banking.

"With sell factors for both the dollar and the euro, the market is closely watching the upcoming European summit meeting and developments for the US debt negotiations," Kawabe said.

Leaders of the eurozone countries are holding an emergency summit Thursday aimed at averting a default by Greece and preventing the debt contagion from spreading to larger economies such as Italy and Spain.

The yen showed little reaction after Japanese Finance Minister Yoshihiko Noda said Tuesday recent movement in the currency market has been "one-sided".

"The caution over Japan's potential intervention doesn't seem strong in the market" as market participants are shifting their focus to the Greece debt woes, Daisuke Karakama, market economist at Mizuho Corporate Bank, told Dow Jones Newswires.

The dollar weakened against most other Asian currencies, falling to Sg$1.2162 from Sg$1.2195 on Monday and to 1,059.20 South Korean won from 1,061.47.

The unit also sagged to 42.98 Philippine pesos from 43.08 and to 29.94 Thai baht from 30.09. But it firmed to Tw$28.92 from Tw$28.91 and to 8,559.12 Indonesian rupiah from 8,525.00.

AFP

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