-- Euro and French bond yields steady as Moody's downgrades France
-- Traders look ahead to meeting to decide Greece's next aid payment
-- Norwegian krone strengthens as 3Q GDP slows but by less than expected
By Alexandra Fletcher
The euro steadied against the dollar during European trading hours Tuesday as investors fixed their gaze on an upcoming meeting of euro-zone finance ministers to discuss Greece's pending bailout payments and shrugged off overnight news that France's sovereign debt rating had been downgraded.
Having fallen to as low as $1.2764 against the dollar in early Asian trade after Moody's Investors Service stripped France of its coveted triple-A rating, the euro bounced to as high as $1.2823 before settling around the $1.28 mark.
French government bonds were little changed after Moody's cut France's rating to Aa1 from Aaa, mirroring a similar move by Standard & Poor's Ratings Services in January.
Dietmar Horning, a lead analyst for Moody's, told Dow Jones Newswires that France's downgrade could affect the ratings of the euro zone's bailout facilities. France is the second-largest contributor to the euro zone's bailout facilities known as the European Financial Stability Facility and its permanent replacement the European Stability Mechanism.
But currency traders were mostly unperturbed, enabling markets to maintain an even keel.
"Had this downgrade occurred at a time the EFSF/ESM was being used heavily this might be more of a concern than it is," said Jim Reid, a strategist at Deutsche Bank in London in a note to clients.
"Markets have got over the shock of some of the major economies of the world losing their top rating, so this move probably won't have much short-term impact. Greece, the Middle East and particularly the fiscal cliff remain the main short-term drivers," Mr. Reid added.
European finance ministers are due to meet later today to agree the release of a long-delayed 31.5 billion euros ($40.2 billion) aid payment to Greece. Some Eurogroup officials said overnight that the meeting would address only how to bridge a EUR15 billion gap in the country's financing through to 2014, but wouldn't decide how to tackle the additional EUR17.6 billion Greece will need to stay financed from 2014 to 2016.
The one thing parties seemed to agree on, the officials said, was that no new funding beyond what's already been agreed should be made available to the country.
Elsewhere, the Norwegian krone rose against the euro as Norway's economic growth slowed in the third quarter but by less than expected. Mainland gross domestic product, which strips out oil and shipping activity, expanded 0.7% in the three months to Sept. 30 compared with the previous quarter as the country felt the slowdown elsewhere in Europe.
Looking ahead, a survey of economists by Dow Jones Newswires suggested the Turkish central bank would cut the upper end of its interest rate corridor by 50 basis points to 9% at 1200 GMT.
At 1142 GMT, the euro was trading at $1.2809 against the dollar, compared with $1.2813 late Monday in New York, according to trading system EBS. The dollar was at Y81.38 against the yen, compared with Y81.41, while the euro was at Y104.26, compared with Y104.05. Meanwhile, the pound was trading at $1.5926 against the dollar, compared with $1.5896 late Monday in New York.
The Wall Street Journal dollar index, which tracks the U.S. dollar against a basket of currencies, was at 70.722 from about 70.724.
A summary of key levels for chart-watching technical strategists is below:
Forex spot: EUR/USD USD/JPY GBP/USD USD/CHF
Spot 1103 GMT 1.2804 81.29 1.5925 0.9408
3 Day Trend Bullish Bullish Bullish Bearish
Weekly Trend Bearish Bullish Bearish Range
200 day ma 1.2864 79.24 1.5883 0.9395
3rd Resistance 1.2876 81.78 1.6017 0.9491
2nd Resistance 1.2831 81.59 1.5990 0.9440
1st Resistance 1.2823 81.43 1.5965 0.9429
Pivot* 1.2788 81.36 1.5906 0.9417
1st Support 1.2764 81.08 1.5893 0.9395
2nd Support 1.2745 80.89 1.5845 0.9381
3rd Support 1.2712 80.65 1.5830 0.9315
Forex spot: AUD/CAD
Spot 1104 GMT 1.0366
3 Day Trend Bearish
Weekly Trend Bullish
200 day ma 1.0296
3rd Resistance 1.0475
2nd Resistance 1.0420
1st Resistance 1.0388
1st Support 1.0327
2nd Support 1.0285
3rd Support 1.0265
Write to Alexandra Fletcher at [email protected]
(Dow Jones Technical Strategist Francis Bray contributed to this story.)
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