“Clearly risks are rising, but not sufficient to tip the euro over the edge yet. There’s also a range of support on the way down, it’s not going to collapse even if it falls through $1.40,” said Greg Gibbs, a strategist at RBS in Sydney. The euro last traded at $1.4046 , compared with $1.4065 late in New York on Friday. Early in the session, it was marked down to around $1.4020.
Merkel’s Christian Democrats lost power on Sunday in the rich state of Baden-Wuerttemberg, where anti-clear sentiment has been mobilized by radiation leaks from an earthquake-stricken nuclear plant in Japan. The loss of the regional stronghold could limit Merkel’s ability to pass legislation as her coalition centre-right government deals with nuclear power, military action in Libya and the euro zone debt crisis. While erosion of Merkel’s clout at home weighed on the euro, prospects of a European Central Bank rate was an important element holding up the single currency, Gibbs said.
Along with its gains versus the euro, the dollar firmed against the yen , helped by Friday’s comments from a US central bank official who said the Federal Reserve is poised in the “not-too-distant future” to begin rolling back its super loose monetary policy to avert inflation. Easier US policy has helped boost global financial markets by flooding them with cheap money in search of higher returns, though it has also added to inflationary pressures in emerging economies.
Japan’s Nikkei fell 0.4 percent as workers continued to battle to stem radiation leaks at the crippled Fukishima nuclear plant, and more dead were pulled from the rubble in the country’s northeast, which was devastated by a massive quake and tsunami on March 11. Shares elsewhere in Asia were mainly weaker, with MSCI’s index of Asian shares outside Japan easing 0.1 percent.
Further Western air strikes in Libya and tension in Syria, Yemen and Bahrain continued to fuel investor uneasiness over supply from the oil-rich Middle East region and to support safe haven demand for gold. US crude was little changed at $105.38 a barrel and Brent crude edged up 2 cents to $115.61. Spot gold was last at $1,426.19 an ounce, down slightly from Friday and below a record high of $1,447.40 reached on March 24. It still up 2 percent since March 15.
