Euro moved up over 1.36 dollars

The euro staged a modest turnaround against the dollar Wednesday in featureless trading as dealers looked for signals on prospects for the world economy and a proposed European monetary fund.

The single European currency moved up over 1.36 dollars late in the trading day after losing ground on disappointing economic data from Germany, the eurozone’s leading economy.

German exports dropped by an unexpectedly sharp 6.3 percent in January from the previous month, official statistics showed. It was the first monthly fall since August and came as imports grew by 6.0 percent.

The euro later firmed in response to what analyst Michael Hewson of CMC Markets said were “technical” reasons, with investors adjusting their positions ahead of expected macroeconomic data.

Markets were waiting for US figures on trade and weekly jobless claims that are scheduled to be released on Thursday.

The euro in late-day operations was at 1.3652 dollars against 1.3598 late Tuesday in New York.

The dollar was meanwhile trading at 90.66 yen after 89.96 on Tuesday.

Analysts said the euro may also have drawn strength from a German government statement on its controversial proposal for an IMF-style European Monetary Fund to shore up financially distressed eurozone economies.

Berlin said the fund could serve to strengthen the Stability and Growth pact, which sets financial discipline standards in the eurozone, rather than weaken it.

Critics have dismissed such a fund as irrelevant and unnecessary, warning that it could in fact encourage reckless spending by governments confident of being bailed out.

“There is no unanimity on the topic, however, as reflected in other cautious, if not negative, official comments,” said Frederik Ducrozet of Credit Agricole CIB.

“However, the Greek crisis highlights the need for new institutional tools in order to deal with sovereign default and to reinforce the credibility of European fiscal rules in the long run.”

The proposal by German Finance Minister Wolfgang Schaeuble had raised hopes among currency traders for a concrete plan to stabilise public finances in eurozone member Greece.

Investors have continued to keep a wary eye on Greece and the risk that other eurozone countries might be vulnerable to the sort of public debt crisis that is plaguing Athens at the moment.

The Portuguese government said this week it would cut spending, delay investment and sell state assets in an attempt to fix the country’s finances.

“The Greek credit crisis remains a cause of concern, keeping investors away from riskier currencies” such as the euro, said Masatsugu Miyata, a forex dealer at Hachijuni Bank.

The British pound, meanwhile, languished underneath 1.50 dollars following Tuesday’s dire trade data and an ominous warning about the nation’s stretched public finances.

“The pound was hit by yesterday’s increase in Britain’s trade deficit in January which surprised the market and sent the pound tumbling,” said Hewson.

“The pound was dealt a further blow when Fitch ratings criticised the credibility of the government’s budget plans, warning that Britain risks a loss of investor confidence and erosion of its ‘AAA’ rating unless it maps out clear austerity measures.”

In London on Wednesday, the euro was changing hands at 1.3652 dollars against 1.3598 dollars on Tuesday, 123.77 yen (122.35), 0.9123 pounds (0.9066) and 1.4616 Swiss francs (1.4616).

The dollar stood at 90.66 yen (89.96) and 1.0708 Swiss francs (1.0747).

The pound was at 1.4966 dollars (1.4994).

On the London Bullion Market, the price of gold rose to 1,120.50 dollars an ounce at the fixing from 1,115.75 dollars an ounce on Tuesday.