January 16, 2018 / 3:46 PM / a year ago

FOREX-Euro recedes from three-year high, bitcoin tumbles

    * ECB seen sticking to its policy message next week -
    * Signs of Merkel's struggle to govern puts euro on back
    * Bitcoin, other cryptocurrencies plunge on crackdown fears

 (Updates market action, changes dateline, previous LONDON)
    By Richard Leong
    NEW YORK, Jan 16 (Reuters) - The euro retreated from a
three-year high on Tuesday as investors sold the currency on
doubts that the European Central Bank would back away from its
pledge to keep buying bonds at next week's meeting.
    Digital currencies tumbled, with bitcoin losing as much as
18 percent to a four-week low near $11,000 after
reports suggested it was still possible that South Korea could
ban trading them, which intensified fears of a wider regulatory
    Sources close to the ECB told Reuters that the central bank
was unlikely to tweak its policy message so soon, as rate
setters need more time to assess the outlook for the economy and
the euro.
    "For ECB policy-makers, they are thinking 'We have to be
careful to not feed into this run'," Dragah Maher, U.S. head of
FX strategy at HSBC Securities in New York, said.
    After its best three-day performance in nearly two years,
the euro fell as low as $1.2208 on the Reuters report. It was
already pressured by anxiety over whether German Chancellor
Angela Merkel would manage to form a "grand coalition" to
    Members of the centre-left Social Democrats (SPD) in one of 
Germany's regions voted against talks with Merkel's conservative
Christian Democrats (CDU) on Monday, and fresh headlines on that
development triggered a fall in the euro in early European
trading on Tuesday.
    The euro was last down 0.38 percent at $1.2215.
    The euro had climbed 2.7 percent between Thursday and
Monday, making gains not seen since February 2016, and hit as
high as $1.22965, its strongest since December 2014.
    U.S. financial markets were closed on Monday for Martin
Luther King Jr. holiday.
    "This is just some pull-back after strong gains in recent
days, and some headline risk came through this morning raising
concern over whether the new government would be formed in
Germany," said MUFG currency analyst Lee Hardman, in London.
    Euro's decline did not dent bullish sentiment for more gains
in the coming months.  
    Speculators boosted net long positions in the euro to a
record high in the week to Jan. 12, according to futures data
published on Friday.
    The common currency was down 0.14 percent at 135.35 yen.
    The dollar's index against a basket of six major currencies
was up 0.29 percent at 90.703. It was up from Monday's
three-year low of 90.279. 
    Fears of stricter government oversight sparked a broad
sell-off in digital currencies. 
    Along with bitcoin, ethereum and ripple were down 16 percent
and 24 percent, respectively. Most cryptocurrencies posted
double digit losses, according to Coinmarketcap. 
    Currency bid prices at 10:29AM (1529 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.2216        $1.2261     -0.37%         +1.83%      +1.2282     +1.2196
 Dollar/Yen       JPY=        110.7900       110.5200    +0.24%         -1.67%      +110.9700   +110.4800
 Euro/Yen         EURJPY=     135.35         135.54      -0.14%         +0.13%      +136.0900   +135.0000
 Dollar/Swiss     CHF=        0.9646         0.9629      +0.18%         -1.00%      +0.9665     +0.9626
 Sterling/Dollar  GBP=        1.3765         1.3789      -0.17%         +1.87%      +1.3805     +1.3743
 Dollar/Canadian  CAD=        1.2413         1.2428      -0.12%         -1.30%      +1.2451     +1.2413
 Australian/Doll  AUD=        0.7945         0.7963      -0.23%         +1.85%      +0.7974     +0.7938
 Euro/Swiss       EURCHF=     1.1785         1.1810      -0.21%         +0.82%      +1.1828     +1.1779
 Euro/Sterling    EURGBP=     0.8872         0.8894      -0.25%         -0.12%      +0.8900     +0.8862
 NZ               NZD=        0.7266         0.7299      -0.45%         +2.54%      +0.7307     +0.7260
 Dollar/Norway    NOK=        7.8787         7.8788      +0.00%         -4.00%      +7.9008     +7.8697
 Euro/Norway      EURNOK=     9.6255         9.6630      -0.39%         -2.27%      +9.6775     +9.6097
 Dollar/Sweden    SEK=        8.0477         8.0117      +0.07%         -1.88%      +8.0542     +8.0040
 Euro/Sweden      EURSEK=     9.8329         9.8262      +0.07%         -0.06%      +9.8365     +9.8179

 (Additional reporting by Jemima Kelly in London; Masayuki
Kitano in Singapore; Editing by Edmund Blair and Keith Weir)
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