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 Traditional safe-haven the Swiss franc rose 0.4 percent against the
euro, while one-month euro/dollar implied volatility, a key gauge of
how sharp swings in the currency are likely to be, jumped nearly 5
percent to trade around 12 percent..
Analysts judged the reaction to the worries stemming from the
attacks in Paris as rather muted, however, with investors
increasingly focused on rising policy divergence between the
European Central Bank and the Federal Reserve.
Even before the attacks, the euro had lost ground on expectations
the ECB will step up monetary easing next month, possibly cutting
its deposit rate deeper into negative territory and buying more
assets under its quantitative easing program.
Trends in the money market showed investors are fully pricing in a
10 basis points cut in the deposit rate -- from -0.2 percent at
present -- in December.
The euro fell 0.5 percent to $1.0723, not far from last week's
6-1/2-month low of $1.0674, having retreated almost 7 percent from
its Oct. 15 peak of $1.1495. It also touched 130.66 yen, its
lowest since late April, but last stood at 131.92 yen, down slightly
on the day.
"There has been no major upturn in market volatility, but no doubt
the attacks in Paris will raise further the uncertainty over the
outlook for the euro zone economy," said Derek Halpenny, European
head of global markets research at Bank of Tokyo-Mitsubishi.
Vitor Constancio, a top ECB policy setter warned on Monday that the
attacks could hurt investor confidence.
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Analysts said the euro's reaction was counter to the behavior of
investors in the summer months, when the single currency was showing
apparent qualities of a safe-haven. The euro was a major winner then
as investors unwound euro-funded carry trades amid worries about a
Chinese-led global slowdown.
Martin Enlund, chief FX strategist at Nordea, said the attacks are
likely to raise the risk premium for the euro in the short term,
while the longer term a hit to business and consumer sentiment would
depend on how sharply risk sentiment sours.
The yen gave a muted response to data that showed Japan's GDP
slipped more than expected in July-September, the second consecutive
quarter of economic contraction.
(Additional reporting by Hideyuki Sano In TOKYO; Editing by
Catherine Evans)
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