FOREX-Euro falls versus dollar ahead of Greek vote
15/06/2012 at 17:38
Updates prices, adds quotes * Central banks' liquidity pledge reassures investors * Soft U.S. data keeps speculation of Fed easing alive * Options reflect high level of euro uncertainty * Yen gains broadly after BOJ stands pat By Julie Haviv NEW YORK, June 15 Reuters - The euro dropped for the first time in four days against the dollar o n F riday as investors refrained from placing hefty bets ahead of Sunday's pivotal Greek election but took comfort in the willingness of central banks to counter any adverse fallout from the voteG20 officials told Reuters that central banks from major economies stand ready to take steps to stabilize financial markets by providing liquidity and preventing a credit squeeze if the Greek election result roils markets
A coordinated action is likely to support risk appetite and provide relief to the euro, although any bounce could prove temporary given Spain's elevated borrowing costs and the risk of contagion to Italy, the euro zone's third-largest economy
"The market feels risky, but volatility measures are dropping, suggesting that traders are not pricing it as risky, as tail risk is declining on the back of potential central bank policy," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto
The euro
"Leading into Sunday's Greek election, some traders covered short positions, but others appear to be building longs on the belief that regardless of the outcome there is more downside than upside price in, leaving the scales unbalanced in favor of short-term long euro positioning," she said
Traders said the euro had scope to post short-term gains if Greece's pro-bailout parties manage to win a majority in Sunday's election. In a scenario where the far-left anti-bailout parties win, the euro could drop toward near two-year lows of $1.2286 struck earlier this month
< Other stories on euro-zone crisis BREAKINGVIEWS-Isolating Germany won't work Euro-zone crisis in graphics For full multimedia coverage > The euro gained against the dollar this week as investors sliced hefty bearish positions. Speculator euro net shorts reached a record high last week
Uncertainty about the euro was reflected in the options market, where both one-week
Spanish and Italian bond yields eased on Friday but remained near levels considered unsustainable to borrow from capital markets. The deteriorating situation in the euro zone has galvanized policymakers to consider taking action ahead of a G20 summit next week
European Central Bank President Mario Draghi said on Friday the bank was ready to support euro zone banks, should it be required, while Bank of Japan Governor Masaaki Shirakawa said central banks can offer liquidity to calm markets in case the Greek elections heighten tension
The dollar came under pressure as data reflected weakness in the U.S. economy, raising the prospect the U.S. Federal Reserve may resort to further monetary easing
The Federal Open Market Committee, the Fed's policy-making arm, will meet next Tuesday and Wednesday
U.S. manufacturing output contracted in May for the second time in three months and a gauge of factory activity in New York state plunged this month, worrisome signs the American economy is cooling
Separate data showed U.S. consumer sentiment falling to a six-month low in early June
The dollar and euro also came under pressure against the yen after the Bank of Japan announced no change in its monetary policy. Analysts said some investors may have positioned for a more dovish stance and were buying back the yen as a result
The euro
Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit * BridgeStation: view story .134 For more information on Top News: Additional reporting by Anirban Nag; Editing by Dan Grebler julie.haviv@thomsonreuters.com+1-646-223-6153Reuters Messaging: julie.haviv.thomsonreuters.com@reuters.net Currency bid prices at 11:58 a.m. EDT 1558 GMT. All data taken from Reuters calculated from the levels at 4:30 p.m.2030 GMT in the previous New York session. Last US Close Pct YTD Pct 2011 June 14 Change Change Close ------------------------------------------------------------- Euro/dlr
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Keywords: MARKETS FOREX/