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Euro in crisis as losses seen for 2012

Sterling steadied near 10-month highs against the euro on Friday as the euro zone's debt crisis cast a shadow over the single currency, but the fragile state of the UK economy could cap further gains for the pound. The mood in the euro zone remained brittle, with cuts in the credit ratings of 15 of the bloc's 17 countries threatened after a key EU summit last week offered little respite for turbulent euro zone bond markets and cash-starved European banks. But sterling's sensitivity to risk sentiment left it vulnerable after International Monetary Fund chief Christine Lagarde said the global economic outlook was gloomy and rating agency Fitch cut UK-based Barclays along with other major banks. The pound was steady against the euro at around 1.1900 , after rising to a 10-month high on Wednesday of 1.1945.
No major data due today.


The euro, after falling to its weakest level against the dollar since January, is poised to depreciate further as traders lose confidence in the ability of European leaders to contain the region’s debt crisis. Measures in the derivatives market ranging from future volatility implied by option prices to the cost of insuring against a drop in the euro to the record number of bearish bets by hedge funds and other speculators, show traders expect the blueprint unveiled by European leaders this month for a closer fiscal accord will fail to stem the declines. While the euro at $1.3046 remains 8.3 percent above the average since it began trading in 1999, bears say that provides more scope for depreciation as bond yields in Italy and Spain approach levels that prompted bailouts of Greece, Ireland and Portugal. Companies from Spain’s Grupo Gowex to Germany’s GEA Group AG are preparing for some countries to leave the euro and bank failures.
Data 09.00: Current Account.


The dollar rose against most major peers after North Korean state television said national leader Kim Jong Il died, spurring concern instability may increase in the region and boosting demand for the U.S. currency as a haven. Kim, 70, died on Dec. 17 of exhaustion brought on by a sudden illness while on a domestic train trip, the official Korean Central News Agency said. Kim probably had a stroke in August 2008 and may have also contracted pancreatic cancer, according to South Korean news reports. The greenback is currently trading at 1.5500 against sterling, from around 1.5550 on Friday.
No major data due today.


•    The Australian dollar fell against 15 of its 16 major counterparts before the Reserve Bank releases minutes tomorrow of its December meeting when it cut interest rates for the second-straight month. The New Zealand dollar weakened amid concern euro-area policy makers won’t be able to contain the region’s sovereign- debt crisis as they discuss additional funding through the International Monetary Fund. Both South Pacific nations’ currencies extended losses after state television in North Korea announced the death of leader Kim Jong Il, sapping demand for riskier assets.


























red = down

blue = up (snap shot)


These rates are for indication purposes only