Published: Mon, 23 Feb 2009 14:36:31 +0100

Euro Unable to Hold Gains Despite Concerns Over U.S. Bank Nationalization

(CEP News) - The euro has given up most of its gains after a strong start to the week in the Asian trading session.

The euro gained almost two full cents in overnight moves as concerns that the U.S. government could raise its stake in Citigroup, according to currency strategists. However the single currency was unable to break through the 1.30 barrier and is now trading at 1.2797 USD.

Boris Schlossberg, director of currency research at GFT, said the fear of nationalization could continue to support EUR/USD in the short term only. He added that the main risk to the U.S. dollar continues to be the uncertainty over the U.S. government's plans to rescue the faltering the economy.

"President Obama's slow, meditative, compromise-leaden approach to solving the banking sector problem has been a sore disappointment to the type of clear, decisive executive leadership that many investors were seeking," he said.

Over the weekend, European financial ministers met in Germany to discuss common concerns on the economy and financial crisis ahead of the G20 meeting in April. However, strategists said the meeting has had little impact on currency markets.

With the euro unable to break through 1.30 USD, strategists at CIBC World Markets said the recent weakening trend is still in place and recommend selling strength at 1.29 USD and 1.30 USD.

Adam Cole, head of currency strategy at RBC Capital Markets, still remains bearish on EUR/USD, but added he can't ignore the recent rise in risk appetite.

"An extension of the current rally cannot be ruled out if sentiment in equities continues to improve," he said.

Euro/USD down 0.20 cents to 1.2808

USD/CAD down 0.13 cents to 1.2509

USD/Yen up 1.30 points to 94.65

GBP/USD up 1.62 cents to 1.4594

AUD/USD up 0.06 cents to 0.6459

Euro/Yen up 1.53 points to 121.21

Euro/GBP down 1.09 pence to 0.8778

GBP/CAD up 1.88 cents to 1.8253

CAD/Yen up 1.12 points to 75.66

The U.S. Dollar Index is up 0.25 points to 86.73

All data taken at 8:29 a.m. EST

By Neils Christensen, neilsc@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca