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Forex - EUR/USD rebounds from 4-day low, downside risks remain

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Forexpros - The euro edged higher against the U.S. dollar on Thursday, rebounding from a four-day low, but gains were limited amid fears the euro zone's debt crisis could spread to the region's banking sector.

EUR/USD clawed back from 1.4122, the lowest since August 5, to hit 1.4240 during late Asian trade, gaining 0.43% on the day.

The pair was likely to find support at 1.4054, the low of August 5 and a two-week low and resistance at 1.4425, the high of August 8.

French President Nicolas Sarkozy met with Bank of France Governor Christian Noyer on Wednesday, as well as with a number of government ministers to discuss the country's economic and financial situation.

The meeting came amid mounting fears that France's top-tier AAA credit rating could be downgraded if the euro zone sovereign debt crisis worsened.

Shares in the three biggest French lenders, Societe Generale, BNP Paribas and Credit Agricole suffered heavy losses during Wednesday's trading session on the CAC 40 index in Paris, with SocGen plunging by as much as 23% at one point, underscoring concerns that the region's debt crisis could spill over to major banks across the single currency bloc.

Meanwhile, the Federal Reserve pledged on Tuesday to keep its benchmark interest rate at an all-time low, adding that it will maintain a loose monetary policy until "at least through mid-2013."

In a statement, the Fed said growth was much slower than expected and the labor market had deteriorated, underlining concerns over the U.S. economic outlook.

Elsewhere, the euro was also up against the pound, with EUR/GBP adding 0.15% to hit 0.8802.

Later in the day, the European Central Bank was to publish its monthly bulletin, while the U.S. was to release official data on its trade balance, as well as a government report on initial jobless claims and natural gas stockpiles.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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