* USD: Higher, unwind of carry trades sparked by Fed optimism about the US recovery, Greek fiscal problems
* JPY: Lower, Kan welcomes USD/JPY at 90, budget uncertainty
* EUR: Lower, Greek debt downgrade, construction output declines
* GBP: Lower, retail sales decline
* CAD and AUD: AUD & CAD lower, spike in risk aversion, Canada's inflation rises/investment flows strong
Overview
USD surged to a three-month high with the EUR pressured by S&P downgrade of Greece's debt rating and in reaction to Fed optimism about the US economy. S&P lowered Greece's debt rating by a notch. The downgrade of Greek debt generates concern about the EU fiscal outlook. The Fed says that the US economy is picking up and deterioration of the labor market is abating. Although the Fed stopped short of signaling when it will begin to hike interest rates the Fed is moving closer to the end of its ease cycle and the USD is supported by unwind of USD carry trades. Bloomberg reports that unwind of the USD carry trade may be the biggest threat to the global economy in 2010. According to the report everyone is borrowing in USD at zero rates and using the funds to buy higher yielding assets around the globe. As the Fed moves away from zero interest rates the USD may rally as carry trades are unwound and this will reduce liquidity for equities and commodities markets. GBP was pressured by report of unexpected decline in UK retail sales. Commodity currencies traded lower tracking weaker equity markets with CAD trading lower despite report of higher than expected Canadian CPI. JPY trades lower despite weaker equity market trade pressured by a broad USD gains versus Europe and concern about Japan's budget outlook. Today's US economic data was mixed with jobless claims posting an unexpected rise and LEI and the Philly Fed coming in stronger than expected. Today's US data fits with the Fed's forecast of improving US economy with limited jobs growth.
Today's US data:
Initial jobless claims for week ending 12/12 rose by 7k to 480k a reading of 470k was expected. Continuing jobless claims posted a slight rise to 5.19mln from 5.16mln last week. November leading indicators rose by 0.9%, a reading of 0.6% was expected. December Philly Fed rose to 20.4, a reading of 16.5 was expected.
Upcoming US data:
No major US data is due for release Friday.
JPY
JPY traded lower pressured by spillover from broad USD gains against Europe sparked by upbeat Fed outlook and downgrade of Greece's debt rating by S&P. JPY was also pressured by continued uncertainty about the Japanese budget outlook. Japan says that its 2010/11 budget will be at ¥92trln. MOF officials said that Japanese government needs to cut at least 3trln from the budget to keep bond issuance below ¥44trln. The ratings agency Fitch said that Japan's debt rating may be downgraded if bond issuance rises above this level. Japan's national Strategy Minister Kan said that the weaker JPY is desirable and he welcomes USD rise to 90.00. According to Kan 90 is the rate that many Japanese companies assume in their business plans for USD/JPY. JPY downside was limited by gains in cross trade to Europe and the commodity currencies with EUR/JPY trading 1% lower in reaction to the Greek debt downgrade. Focus turns to the conclusion of the BOJ policy meeting Friday. Earlier in the month the BOJ elected to ease monetary policy and provide additional funding to try to weaken the JPY and combat deflation. The trade expects the BOJ to keep monetary policy unchanged. In light of recent weakness of the JPY the BOJ is unlikely to make reference to the JPY.
On December 18th revised October leading indicators will be released expected at 2.5 compared to 4.2 last month.
Key technical levels to watch in USD/JPY include support at 89.35 the December 16th low with resistance at 90.40 the December 7th high and 90.86 the November 6th high.
091217_dailyfx_1
EUR
EUR traded at a three-month low versus the USD pressured by S&P downgrade of Greece's debt rating and speculation that upbeat assessment of US economic outlook by the Fed sets the stage for the beginning of the Fed's tightening cycle. General consensus is the Fed will begin to gradually raise interest rates mid 2010. Much of the recent weakness in the USD is attributed to speculation that the Fed would keep interest rates low possibly into 2011. The outlook for low US yields encouraged funding of carry trades in the USD. The change in the outlook for the timing of Fed rate hikes sparked unwind of USD carry trades boosting demand for the USD. EUR was also pressured by report that construction output declined for the six month in a row. November construction output declined by 0.6%. The decline in EU construction output generates concern about the strength of the EU economic recovery and the report may dampen expectations of a more rapid withdrawal stimulus by the ECB. Concern about the deterioration of sovereign debt outlook in the EU will also limit the ECB's ability to tighten monetary policy. There is a clear change in sentiment and focus in Forex trade away from concern about rising US budget deficits and low US interest rates to debt troubles in EU. Uncertainty about sovereign debt risks in the EU generates concern about the stability of European monetary Union and the credibility of the EUR. The EUR looks much less attractive as an alternative to USD as a reserve currency in light of sovereign debt worries in the EU.
The technical outlook for the EUR is negative as the EUR breaks trend line support. Expect EUR support at 1.4175 the September 1st low with resistance at 14531 the December 17th high.
091217_dailyfx_2
GBP
GBP traded lower pressured by report of weaker than expected UK retail sales, S&P downgrade of Greece's debt and speculation that the Fed will begin to gradually raise interest rates mid 2010. UK November retail sales declined by 0.3%. December CBI sales were unchanged at +13. The decline in retail sales and lack of improvement and CBI sales generates concern about the outlook for the UK recovery. GBP remains vulnerable to uncertainty about BOE policy outlook. The BOE is likely to be the last central bank to begin to withdraw stimulus and this means that yield differential is moving in favor of the USD. Recent UK economic data however may encourage the BOE to pause in its asset purchase plan and quantitative ease as the UK labor market is stabilizing and inflation rising. Wednesday the UK reported that the job claimant count fell for the first time since February 2008. UK November CPI rose at an annual rate of 1.9% which brings the UK inflation rate close to the BOE's 2% target. Last week the BOE left interest rate policy unchanged and said it will maintain its current level of asset purchases. The BOE left interest rates unchanged at a record low 0.5% and the level of asset purchases at £200bln. The BOE is expected to wait until the release of the February inflation report before it decides to make any adjustments in monetary policy or in the size of its asset purchase plan. The BOE's Barker said the BOE must be cautious of how much farther to expand its bond purchase plan. Today's UK data shows that UK consumer remains retrenched and this suggests that UK recovery will be weak. In light of the Feds upbeat assessment of the US economic outlook growth differential and yield differential are moving more in favor of the USD.
The technical outlook for GBP is negative as GBP trades below 1.6100. Expect near-term support at 1.6020 with resistance at 1.6240.
091217_dailyfx_3
CAD
CAD traded lower despite report of higher than expected Canadian inflation and strong net foreign investment flows. CAD was pressured by weaker equity market trade and spillover from broad USD strength against Europe. Canada's inflation rose more than expected and foreign demand remains strong for Canadian bonds. Canada's November CPI rose by 0.5% m/m and 1% y/y with core inflation at 0.4% m/m and 1.5% y/y. Despite the rise in Canada's inflation the BOC is expected to maintain low yields through mid-2010. Net foreign investment flows to Canada rose by 5.81bln in October the trade had expected a 5bln reading. This week's economic data from Canada points towards quicker economic recovery with manufacturing shipments and leading indicators coming in higher than expectation and inflation rising faster than expected. It's not clear whether the improved outlook for the US economy will boost demand for the CAD on speculation that economic growth in North America is starting to accelerate or if as in today's trade the focus is on the prospects for US interest rates to rise sooner than in Europe and Canada. Yield differential is emerging as the key short-term driving factor for Forex trade and the CAD.
The technical outlook for CAD is negative as USD/CAD consolidates trades above 1.0700. Look for near-term support at 1.0552 the December 15th low with resistance at 1.0780 the November 9th high 1.0855 November 3rd high.
091217_dailyfx_4
AUD
AUD traded sharply lower pressured by weaker global equity market trade and speculation that US and Australian yield gap is set to narrow as the Fed lays the foundation for future rate hikes and the RBA moves towards steady policy. As noted above the Fed indicated greater optimism about the US recovery and this is seen by many as the beginning of the end of easy Fed monetary policy. The Fed statement generates speculation that the timeframe for Fed rate hikes will be moved forward in 2010. Although the RBA was the first major industrialized central bank to hike interest rates this year recent statements from the RBA suggest that further rate hikes are less certain. Wednesday the RBA's deputy governor Battelino said that Australian interest rates are back in the normal range and he sees less need for a rate hike if loan rates keep rising. His comments follow Tuesday's release of the RBA policy minutes for December. The RBA policy minutes were seen as less hawkish and dampen speculation that the RBA will hike rates aggressively at the start of 2010. The minutes for the December RBA policy meeting said that arguments for a rate hike are finely balanced and that the current rate structure is less accommodative. In addition to Australia's economic data was mixed with industrial activity up 2.2 points to 50.4 and November merchandise imports declining by 2%. Wednesday Australia reported weaker than expected rise in Q3 GDP. There was little reaction to report that the RBA sold A$313 mln in November. This was slightly higher than the is A$307mln in sales in October but the size of the sales does not indicate the RBA is aggressively intervening to try and weaken the AUD. AUD remains vulnerable to diminished RBA rate hike speculation and speculation that Fed is moving closer to the end of its ease cycle.
The technical outlook for the AUD is negative as the AUD drops below above 9100. Expect AUD support at 8755 the October 6th low with resistance at 9004 the December 17th high.
091217_dailyfx_5
Friday, December 18, 2009
WORLD FOREX: Dollar Surges As Demand For Risk Wanes
-The dollar surged Thursday as demand for risk waned amid lingering global credit concerns and continued reaction to the Federal Reserve's optimistic view on the U.S. economy.
The rally picked up steam in New York as investors scurried to cover bets against the dollar, sending the euro at one point to $1.4304, its lowest level since Sept. 4. The dollar traded above 90 yen for the first time in a week and reached the highest level in more than three months against a basket of six currencies.
The rally picked up steam in New York as investors scurried to cover bets against the dollar, sending the euro at one point to $1.4304, its lowest level since Sept. 4. The dollar traded above 90 yen for the first time in a week and reached the highest level in more than three months against a basket of six currencies.
Asian forex market wrap: wild ride for CHF and JPY crosses
* Rumours of coup in Pakistan trigger huge stops in EUR/CHF
* JPY crosses fall hard as risk aversion returns
* BoJ leave rates unchanged and easy monetary conditions remain
* Regional stockmarkets are presently around 0.75% lower
* Gold has added just $1 to $1108/oz
There has been a wild ride today for all of the major currencies with the GBP probably being the most sedate.
A good sized selling flow in AUD/JPY set the ball rolling this morning. This drove the AUD/USD below its 100-day MA at .8850, which was also the NY low, which in turn saw more stop loss selling emerge. USD/JPY then started to slide and when the Pakistan rumour hit the market, the selling of JPY crosses intensified even further. USD/JPY bottomed out at 89.00 and AUD/USD at .8812. Denials of the rumour led to some sharp short covering.
USD/CHF and EUR/CHF were also major movers in the morning. The cross fell below 1.5000 on the rumours and when the SNB didn’t emerge, EUR/CHF quickly fell 100 pips.
EUR/USD fell to its session low at the height of the cross selling but the bids at 1.4300 again proved very solid and there has been a big bounce of over 100 pips.
GBP has remained fairly quiet, obviously volatile on the crosses when the big moves were taking place.
Ranges: EUR/USD 1.4308/1.4411; EUR/CHF 1.4907/1.5026; USD/CHF 1.0389/1.0495; USD/JPY 88.96/90.04; EUR/JPY 127.35/129.37; AUD/USD .8812/.8902; Cable 1.6114/1.6218.
* JPY crosses fall hard as risk aversion returns
* BoJ leave rates unchanged and easy monetary conditions remain
* Regional stockmarkets are presently around 0.75% lower
* Gold has added just $1 to $1108/oz
There has been a wild ride today for all of the major currencies with the GBP probably being the most sedate.
A good sized selling flow in AUD/JPY set the ball rolling this morning. This drove the AUD/USD below its 100-day MA at .8850, which was also the NY low, which in turn saw more stop loss selling emerge. USD/JPY then started to slide and when the Pakistan rumour hit the market, the selling of JPY crosses intensified even further. USD/JPY bottomed out at 89.00 and AUD/USD at .8812. Denials of the rumour led to some sharp short covering.
USD/CHF and EUR/CHF were also major movers in the morning. The cross fell below 1.5000 on the rumours and when the SNB didn’t emerge, EUR/CHF quickly fell 100 pips.
EUR/USD fell to its session low at the height of the cross selling but the bids at 1.4300 again proved very solid and there has been a big bounce of over 100 pips.
GBP has remained fairly quiet, obviously volatile on the crosses when the big moves were taking place.
Ranges: EUR/USD 1.4308/1.4411; EUR/CHF 1.4907/1.5026; USD/CHF 1.0389/1.0495; USD/JPY 88.96/90.04; EUR/JPY 127.35/129.37; AUD/USD .8812/.8902; Cable 1.6114/1.6218.
FOREX-Swissie off highs but dollar slips in bumpy market
Swiss franc up as euro, dollar longs liquidated
Currencies
* Pakistan coup rumour fuels Swissie move, rumour denied
* Cross/yen falls but recovers on investor short-covering
* Dollar falls versus yen and euro in whippy market
By Kaori Kaneko
TOKYO, Dec 18 (Reuters) - The Swiss franc rose on Friday as investors unwound long euro positions in the approach to the year-end, helped by rumours of a coup in Pakistan that were quickly denied and by stop-loss orders which propelled it up.
In turbulence that also sent the dollar and other currencies down against the low-yielding yen, the euro fell to 1.4910 francs, its weakest level since March when the Swiss National Bank intervened to sell francs after announcing steps to fight deflation.
The dollar remained under pressure but the euro later recovered to stand just 0.3 percent lower on the day at 1.4968 francs EURCHF=R, with traders edgy the central bank might opt to intervene later to bring it above the 1.50 francs threshold.
The yen also later gave up the steepest of its gains on crosses such as the Australian dollar perceived as riskier trades, which have also been hit against the dollar this week as investors close out long positions for the year.
"I get the impression that market players are not wasting time to clean up their positions as we have only a few more days," a hedge fund sales trader for a Japanese bank said.
"Today's move in euro/Swiss, dollar/yen and cross/yen are all part of that last-minute liquidation."
The Swiss franc had gained on Thursday after a one-year tender by the European Central Bank, as banks in the eurozone sold euros to buy francs for Swiss franc-denominated loans. [ID:nLDE5BF21L]
Yen crosses fell in early trade as a weak day on Wall Street set the market up for closing out riskier positions. Talk of a coup in Pakistan fuelled that sentiment, helping send the euro even lower and triggering sell orders below 1.50 francs.
A spokesman for Pakistani President Asif Ali Zardari dismissed the coup rumours that started after a government minister suspected of corruption was stopped from leaving the country, saying there was no coup. [ID:nSGE5BH00F]
"Stops below 1.50 francs accelerated falls in a market with low liquidity and spurred risk avoiding trade at the year-end," said Tomohiro Nishida, treasury department manager at Chuo Mitsui Trust and Banking Company.
Forex moves have become more erratic as dealers tend to be unwilling to hold positions for long before the year's close.
"In this thin market, it's no surprise that the market could be volatile. And since there is no clear direction now in the market, stops could play a major role," said a trader at a Japanese trust bank.
The net result of a series of position liquidations was the dollar retreating from three month highs hit the previous day.
The euro, which struggled on Thursday after S&P became the second rating agency this month to downgrade Greece, rose 0.3 percent to $1.4383 EUR= after falling to $1.4304 the previous day, its lowest since early September.
The dollar index, a gauge of the greenback's performance against other six major currencies, fell 0.3 percent to 77.498, off Thursday's high of 77.943, its highest since early September.
Yen crosses fluctuated but came off the steepest of their earlier lows on short-covering.
The euro was steady on the day at 128.90 yen EURJPY=R, sterling slipped 0.2 percent GBPJPY=R and the Australian dollar fell 0.2 percent AUDJPY=R.
The Bank of Japan voted as expected to keep its overnight call rate target at 0.1 percent on Friday and said it would not tolerate deflation, backing concerns from the government and potentially setting the scene for more easing. [ID:nTKV006319]
BOJ Governor Masaaki Shirakawa holds a news conference later with embargoed comments expected to come out some time after 4:15 p.m. (0715 GMT) and markets will be watching for hints on policy.
The yen showed little reaction to the decision, and the dollar was down 0.4 percent at 89.62 yen JPY=.
Currencies
* Pakistan coup rumour fuels Swissie move, rumour denied
* Cross/yen falls but recovers on investor short-covering
* Dollar falls versus yen and euro in whippy market
By Kaori Kaneko
TOKYO, Dec 18 (Reuters) - The Swiss franc rose on Friday as investors unwound long euro positions in the approach to the year-end, helped by rumours of a coup in Pakistan that were quickly denied and by stop-loss orders which propelled it up.
In turbulence that also sent the dollar and other currencies down against the low-yielding yen, the euro fell to 1.4910 francs, its weakest level since March when the Swiss National Bank intervened to sell francs after announcing steps to fight deflation.
The dollar remained under pressure but the euro later recovered to stand just 0.3 percent lower on the day at 1.4968 francs EURCHF=R, with traders edgy the central bank might opt to intervene later to bring it above the 1.50 francs threshold.
The yen also later gave up the steepest of its gains on crosses such as the Australian dollar perceived as riskier trades, which have also been hit against the dollar this week as investors close out long positions for the year.
"I get the impression that market players are not wasting time to clean up their positions as we have only a few more days," a hedge fund sales trader for a Japanese bank said.
"Today's move in euro/Swiss, dollar/yen and cross/yen are all part of that last-minute liquidation."
The Swiss franc had gained on Thursday after a one-year tender by the European Central Bank, as banks in the eurozone sold euros to buy francs for Swiss franc-denominated loans. [ID:nLDE5BF21L]
Yen crosses fell in early trade as a weak day on Wall Street set the market up for closing out riskier positions. Talk of a coup in Pakistan fuelled that sentiment, helping send the euro even lower and triggering sell orders below 1.50 francs.
A spokesman for Pakistani President Asif Ali Zardari dismissed the coup rumours that started after a government minister suspected of corruption was stopped from leaving the country, saying there was no coup. [ID:nSGE5BH00F]
"Stops below 1.50 francs accelerated falls in a market with low liquidity and spurred risk avoiding trade at the year-end," said Tomohiro Nishida, treasury department manager at Chuo Mitsui Trust and Banking Company.
Forex moves have become more erratic as dealers tend to be unwilling to hold positions for long before the year's close.
"In this thin market, it's no surprise that the market could be volatile. And since there is no clear direction now in the market, stops could play a major role," said a trader at a Japanese trust bank.
The net result of a series of position liquidations was the dollar retreating from three month highs hit the previous day.
The euro, which struggled on Thursday after S&P became the second rating agency this month to downgrade Greece, rose 0.3 percent to $1.4383 EUR= after falling to $1.4304 the previous day, its lowest since early September.
The dollar index, a gauge of the greenback's performance against other six major currencies, fell 0.3 percent to 77.498, off Thursday's high of 77.943, its highest since early September.
Yen crosses fluctuated but came off the steepest of their earlier lows on short-covering.
The euro was steady on the day at 128.90 yen EURJPY=R, sterling slipped 0.2 percent GBPJPY=R and the Australian dollar fell 0.2 percent AUDJPY=R.
The Bank of Japan voted as expected to keep its overnight call rate target at 0.1 percent on Friday and said it would not tolerate deflation, backing concerns from the government and potentially setting the scene for more easing. [ID:nTKV006319]
BOJ Governor Masaaki Shirakawa holds a news conference later with embargoed comments expected to come out some time after 4:15 p.m. (0715 GMT) and markets will be watching for hints on policy.
The yen showed little reaction to the decision, and the dollar was down 0.4 percent at 89.62 yen JPY=.
China Hires Pimco's Changhong Zhu To Manage Country's Giant Forex Reserves
It's been joked that PIMCO is the fourth branch of the US government, but it seems the kings of fixed income are doing well with the Chinese government as well.
Manager Changhong Zhu is being hired by China as its Chief Investment Officer, basically overseeing a staggering $2.3 trillion of forex reserves.
According to Bloomberg, Zhu joined PIMCO in 1999, and is a member of its investment committee.
Manager Changhong Zhu is being hired by China as its Chief Investment Officer, basically overseeing a staggering $2.3 trillion of forex reserves.
According to Bloomberg, Zhu joined PIMCO in 1999, and is a member of its investment committee.
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FOREX-Dollar lacklustre; Swiss franc off highs
Dollar pares losses on Iraq-Iran tensions
* Swiss franc pares gains;, euro at 1.4992 francs EURCHF=
* German Ifo index slightly firmer than expected
(Releads, updates prices)
By Tamawa Desai
LONDON, Dec 18 (Reuters) - The dollar was lacklustre against most major currencies apart from the yen on Friday as share prices recovered, while the Swiss franc pared gains after surging earlier in the session in thin trade.
The greenback, however, pared its losses against the euro late in European morning after an Iraqi official said Iranian troops had briefly entered Iraqi territory on Thursday and spent several hours at an Iraqi oilfield. [ID:nLDE5BH167]
By 1226 GMT, the euro was flat on the day at $1.4351 EUR= after the report, down from around $1.4380 beforehand.
The Swiss franc had risen as investors unwound long euro positions in the approach to the year-end, helped by rumours of a coup in Pakistan that were quickly denied and by stop-loss orders which propelled it up. [ID:nLDE5BD0AK]
The euro fell to 1.4910 francs, its weakest level since March when the Swiss National Bank (SNB) intervened to sell francs after announcing steps to fight deflation.
It was last at 1.4992 francs EURCHF=R, down 0.1 pct on the day, just shy of the SNB's perceived threshold of 1.50 francs.
"The markets are fairly illiquid, which is exaggerating moves," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ. "Momentum is key, and you don't want to go against momentum right now."
"There may not be much benefit for the SNB to intervene now, given the markets are so illiquid," he added.
But traders said the euro's rebound against the Swiss franc was partly on expectations the SNB would step in to sell its currency.
The euro also recovered ground after steep falls against the dollar and yen.
It showed little reaction to the German Ifo institute's sentiment index which rose to 94.7 in December, slightly higher than expectations for 94.5, and up from 93.9 the previous month. [ID:nBEB004418]
"From a historic perspective, the Ifo index is still at a moderate level. In this context, the ECB is not under pressure to shift gears on rates in the forseeable future," said Ulrich Wortberg, economist at Heleba.
The euro had struggled the previous day, falling to a low of $1.4304, after S&P became the second ratings firm this month to downgrade Greece.
The pair was on track for its third weekly fall in sucession.
European stocks .FTEU3 had risen 0.2 percent by midday trade, while U.S. stock futures SPc1 were up 0.4 percent
DOLLAR, YEN PRESSURED
The dollar index .DXY, a gauge of the greenback's performance against six major currencies, fell 0.2 percent to 77.545, off Thursday's peak of 77.943 which was its highest since early September.
Yen crosses, which fell sharply in the wake of euro/Swiss franc's fall, came off their lows on short-covering.
The euro was up 0.7 on the day at 129.80 yen EURJPY=R, sterling was also up 0.6 percent at 146.21 yen GBPJPY=R and the Australian dollar rose 0.7 percent AUDJPY=R.
The dollar was up 0.4 percent at 90.23 yen JPY=.
The Bank of Japan kept interest rates steady as expected, but in a surprise move, changed its definition of long-term price stability, saying it would not tolerate zero inflation or falling prices. [ID:nT289621]
BOJ Governor Masaaki Shirakawa said the new definition of long-term price stability did not mean monetary policy would be guided by short-term price moves alone. [ID:nTKU105765]
"While the shared concern about the deflation by both the government and the BoJ should limit the upward pressure on the yen, their commitment remains uncertain and poses near-term risk of disappointment and a rebound of the yen," said Barclays analysts in a note. (Additional reporting by Kaori Kaneko in Tokyo; Editing by Toby Chopra)
* Swiss franc pares gains;, euro at 1.4992 francs EURCHF=
* German Ifo index slightly firmer than expected
(Releads, updates prices)
By Tamawa Desai
LONDON, Dec 18 (Reuters) - The dollar was lacklustre against most major currencies apart from the yen on Friday as share prices recovered, while the Swiss franc pared gains after surging earlier in the session in thin trade.
The greenback, however, pared its losses against the euro late in European morning after an Iraqi official said Iranian troops had briefly entered Iraqi territory on Thursday and spent several hours at an Iraqi oilfield. [ID:nLDE5BH167]
By 1226 GMT, the euro was flat on the day at $1.4351 EUR= after the report, down from around $1.4380 beforehand.
The Swiss franc had risen as investors unwound long euro positions in the approach to the year-end, helped by rumours of a coup in Pakistan that were quickly denied and by stop-loss orders which propelled it up. [ID:nLDE5BD0AK]
The euro fell to 1.4910 francs, its weakest level since March when the Swiss National Bank (SNB) intervened to sell francs after announcing steps to fight deflation.
It was last at 1.4992 francs EURCHF=R, down 0.1 pct on the day, just shy of the SNB's perceived threshold of 1.50 francs.
"The markets are fairly illiquid, which is exaggerating moves," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ. "Momentum is key, and you don't want to go against momentum right now."
"There may not be much benefit for the SNB to intervene now, given the markets are so illiquid," he added.
But traders said the euro's rebound against the Swiss franc was partly on expectations the SNB would step in to sell its currency.
The euro also recovered ground after steep falls against the dollar and yen.
It showed little reaction to the German Ifo institute's sentiment index which rose to 94.7 in December, slightly higher than expectations for 94.5, and up from 93.9 the previous month. [ID:nBEB004418]
"From a historic perspective, the Ifo index is still at a moderate level. In this context, the ECB is not under pressure to shift gears on rates in the forseeable future," said Ulrich Wortberg, economist at Heleba.
The euro had struggled the previous day, falling to a low of $1.4304, after S&P became the second ratings firm this month to downgrade Greece.
The pair was on track for its third weekly fall in sucession.
European stocks .FTEU3 had risen 0.2 percent by midday trade, while U.S. stock futures SPc1 were up 0.4 percent
DOLLAR, YEN PRESSURED
The dollar index .DXY, a gauge of the greenback's performance against six major currencies, fell 0.2 percent to 77.545, off Thursday's peak of 77.943 which was its highest since early September.
Yen crosses, which fell sharply in the wake of euro/Swiss franc's fall, came off their lows on short-covering.
The euro was up 0.7 on the day at 129.80 yen EURJPY=R, sterling was also up 0.6 percent at 146.21 yen GBPJPY=R and the Australian dollar rose 0.7 percent AUDJPY=R.
The dollar was up 0.4 percent at 90.23 yen JPY=.
The Bank of Japan kept interest rates steady as expected, but in a surprise move, changed its definition of long-term price stability, saying it would not tolerate zero inflation or falling prices. [ID:nT289621]
BOJ Governor Masaaki Shirakawa said the new definition of long-term price stability did not mean monetary policy would be guided by short-term price moves alone. [ID:nTKU105765]
"While the shared concern about the deflation by both the government and the BoJ should limit the upward pressure on the yen, their commitment remains uncertain and poses near-term risk of disappointment and a rebound of the yen," said Barclays analysts in a note. (Additional reporting by Kaori Kaneko in Tokyo; Editing by Toby Chopra)
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