Euro likely to hold gains versus dollar in busy week

Monday, 22 November 2010 00:01 -     - {{hitsCtrl.values.hits}}

New York (Reuters): The euro is likely to remain stable next week after rising for three straight days against the dollar as worries about debt-strapped Ireland have eased, although lingering worries about the risk of contagion to other euro zone economies could curb further gains.

The euro on Friday rose across the board. In late afternoon trading, the euro was up 0.3 percent at $1.3684, after rising as high as $1.3733 on trading platform EBS.

After sliding to a seven-week low of $1.3446 earlier in the week, the euro ended the week little changed against the dollar. On the month, however, the euro was still down 2 percent.

Hopes that Ireland was near a deal to get tens of billions of euros from its European partners and the IMF helped push the euro above $1.37 overnight.

Momentum, however, stalled ahead of resistance around $1.3750. Traders said this level is likely to hold until markets get more details on the Irish rescue plan.

In the currency options market, euro sentiment stabilized for now. The one-month euro/dollar risk reversal, a barometer of currency sentiment, started to creep higher, suggesting investors near-term are starting to get less euro-bearish.

The euro’s risk reversal still showed a “put” bias, but it has risen from extremely low levels. On Friday, puts traded higher -- a mid-market of -1.175 vols, with bids at -1.55 vols. On Thursday, bids on euro puts were at -1.60, down from -2.025 early this week, a roughly 2-1/2-month low.