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Mon 18 Jul 2011 09:37 AM

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Euro, dollar strike new lows on Swiss franc

Euro escapes relatively unscathed from EU bank stress tests, but dealers have little confidence in results

Euro, dollar strike new lows on Swiss franc
Euro currency

The euro and dollar both struck record lows against the
Swiss franc in Asia on Monday while gold reached new highs as investors sought
safety from debt problems plaguing the European Union and US.

The euro gapped lower against the Swiss franc to change
hands at a trough of 1.1365 according to dealers, down from 1.1501 late in New
York on Friday.

Likewise the dollar traded as low as $0.8034 on EBS, against
$0.8129 late on Friday, while gold popped as high as $1,598.41.

"We have limited hope that a comprehensive solution to
the European and US problems will emerge in the next few days, or that there
will be increased clarity in the global economic outlook," said analysts
at Barclays.

"Hence, we expect the very nervous, illiquid trading
conditions of recent weeks to continue...we recommend limited risk
exposures."

All of which kept the euro pinned at $1.4124, against
$1.4144 late on Friday. Immediate support was put at $1.4063 with resistance at
$1.4199.

The single currency escaped relatively unscathed from the EU
bank stress tests released on Friday, though dealers said the market had little
confidence in the results.

Attention had shifted to the next emergency meeting of EU
leaders scheduled for Thursday, amid signs they are edging nearer to a proposal
to buy back Greek debt.

German Chancellor Angela Merkel called on Sunday for private
investors to make a major contribution to bailing out Greece. Officials
proposed a range of schemes for the European Financial Stability Facility to
finance a buy-back or a swap in which private owners of Greek government bonds
would accept cuts in the face value of their holdings.

Meanwhile, in the United States there was little evidence of
progress on raising the country's borrowing ceiling ahead of a deadline of
August 2.

Republican and Democratic senators sought on Sunday to craft
a plan that could avert a government debt default should the talks remain
stalemated.

Senior Democratic aides said the U.S. Senate will likely
begin considering the compromise measure this week. They predicted the
Democratic-led Senate would pass the legislation, but winning over the
Republican-led House of Representatives would pose a bigger challenge.

Both Standard & Poor's and Moody's have warned they
could downgrade the country should the debt limit not be raised.

One early mover in Asia was the New Zealand dollar, which
climbed after domestic inflation data proved higher than expected, adding to
speculation that interest rates might rise before year end.

The kiwi rose to $0.8470, from $0.8445 before the government
reported consumer prices rose 1 percent in the second quarter. Last week, it
hit a 30-year peak of $0.8507 as growth figures showed the economy faring
better than expected.

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