* Euro falls broadly on renewed euro zone worries
* Political uncertainty mounts after Monti says to resign
* China trade data next in focus
By Ian Chua
SYDNEY, Dec 10 The euro came under pressure in
Asia on Monday as the prospect of a recession in Germany and
renewed concerns about Italy weighed on sentiment, while strong
Chinese data helped support the Australian dollar.
The euro fell about 0.3 percent to $1.2880 in thin
early trade, slipping to near a two-week trough of $1.2876 set
Friday. Against the yen, the single currency also shed about 0.3
percent to around 106.15.
Investors sold the euro after Germany's central bank on
Friday warned the euro zone's biggest economy could soon enter
recession and Italian Prime Minister Mario Monti on Saturday
said he intended to resign early, creating uncertainty over who
will succeed him.
Comments from a European Central Bank policymaker on Friday
that an interest rate cut was possible next year if the euro
zone economy does not pick up also weighed on the common
"We're seeing a building of interest rate-cut expectations
really start to take off," said Ilya Spivak, currency strategist
at DailyFX in Sydney.
The euro's losses helped the dollar index edge up 0.3
percent to 80.565. The dollar was a touch firmer against the yen
Traders said the upside for the dollar may be limited in the
lead-up to this week's Federal Reserve policy meeting, with the
market almost certain the U.S. central bank will replace its
expiring Operation Twist programme with a fresh round of
Treasury bond purchases.
Many economists think the Fed will announce on Wednesday
monthly bond purchases of $45 billion, signalling it will
continue to pump money into the U.S. economy during 2013 in a
bid to bring down unemployment.
Jobs data on Friday showed the U.S. unemployment rate fell
to a near four-year low of 7.7 percent as companies kept up
their slow but steady hiring pace in November.
"Despite a drop in the unemployment rate, we expect the Fed
to convert the expiring Operation Twist programme into an
outright purchase programme, with a purchase distribution
similar to the current program," Barclays Capital analysts wrote
in a note.
The market remains worried the U.S. government may fail to
prevent automatic tax hikes and spending cuts set to take hold
next year, which analysts have warned could see the U.S. economy
swing back into a recession.
President Barack Obama met with Republican Speaker of the
House of Representatives John Boehner on Sunday to discuss ways
to avoid the 'fiscal cliff', but a resolution remained elusive.
The Australian dollar held its ground against the greenback
after weekend data showed China's factory output and retail
sales jumped to eight-month highs in November, underpinning
hopes the world's second-biggest economy is regaining momentum.
China is Australia's single biggest export market and
developments there tend to affect demand for the Aussie dollar.
The Aussie stood at $1.0483, steady from late New
York levels, and near an 11-week peak of $1.0515 set last week.
It rose against the euro, which plumbed a three-week low around
Markets will also be keeping an eye on China's trade data on
Monday for further signs the economy is picking up steam.