Euro was little changed against the dollar after a big drop on Friday. Markets began the week with a cautious mood after a dent in sentiment last week following disappointing German retail sales data and Spain announcing its decision to increase its debt to GDP target in excess if what had previously been agreed to with the EU. Spain’s 2012 budget aims to reduce its deficit to GDP ratio to 5.8 percent instead of 4.4 percent.
Looking ahead, focus will turn to euro zone retail sales data due later today. The forecast is for a drop, which if materializes, will be the third decline for three months in a row, confirming that the euro zone debt crisis is hurting the region’s economic growth. Meanwhile, investors will probably take a pause on the euro to wait on the results of the PSI Greek bond swap deal concluding at the end of this week.
EURUSD traded mostly sideways during the Asian session, opening at 1.3190 and hovering at a two week low of 1.3181. Against the yen, euro was weaker. EURJPY opened in Asia at 107.85 and drifted lower to 107.10.
Yen also gained against the U.S. dollar, as USDJPY eased off a nine-month high hit last week. The pair rose too fast and it was due for a pullback for profit taking. USDJPY declined to 81.19 from the session high of 81.85.
Market sentiment in Asia was also dented after comments from Chinese Premier Wen Jiabao who said early this morning that the Chinese government has lowered its target economic growth to 7.5 percent this year, the lowest goal since 2004, after eight straight years of keeping the symbolic target at 8.0 percent.
Worries about slower growth in China weighed on the Australian dollar because China is a major export market for Australia. The lower commodity demand due to slower Chinese and global growth pressured the commodity-linked aussie. AUDUSD eased off a seven-month high of last week 1.0854 to fall to 1.0702.