FOREX-Euro dips as Greece delays debt deal approval
06/02/2012 at 22:25
Updates prices, adds quotes * Greece delays bailout talks while Merkel demands action * Euro seen vulnerable to testing back below $1.30 * IMF chief economist expects substantial Greek 'haircut' By Julie Haviv NEW YORK, Feb 6 Reuters - The euro dropped against the dollar on Monday as Greece's political leaders delayed a decision on a new bailout package, raising concerns of a disorderly default that could spread to other debt-ridden countries in the regionA European Commission spokesman said Greece was already past the deadline for finalizing talks on a second financing package and needed to move urgently
German Chancellor Angela Merkel told Greece to make up its mind quickly on accepting the painful terms for a new EU/IMF bailout, but the country's political leaders responded by delaying their decision for yet another day
"Headlines out of Europe are affecting sentiment on the euro. Earlier, we had hit stop losses in the euro and we saw it trim some losses. But it's more of the same," said Brian Dolan, chief currency strategist at Forex.com, as investors waited on Greece
Greece's coalition members must agree to painful terms of the bailout before euro zone finance ministers next meet. A meeting of political leaders in Athens was postponed to Tuesday. Greece needs the funds by March to meet big debt repayments
The euro
If the impasse in Greece persists, the euro could target $1.3026, the Feb. 1 trough, and more stop-loss orders were said to be below $1.3020
Nomura Securities analysts said they believe a Greece deal is close, both in terms of the private sector involvement process and in relation to negotiations with its lenders around key program parameters
"Since the implications of bad versus good news is clearly asymmetric a bad outcome could have severe implications, it is a tough set-up to trade with confidence," Nomura said. "Nevertheless, we believe a 'good' outcome is likely in the very short term. We are therefore inclined to keep a risk constructive bias within our portfolio at this time." Nomura said EUR/USD at $1.25 is a reasonable target for the first quarter, adding it would not be surprised to see a squeeze higher in the very short term given the still very elevated speculative shorts
< Stories on euro zone debt crisis Main sticking points in bailout talks Analysis-China to play it safe on euro zone Euro zone in graphics Interactive crisis timeline > The IMF's chief economist, Olivier Blanchard, said on Monday it looks like the "haircut" on Greek private debt will be "very large" as negotiations between bondholders and the government drag on
CitiFX, a division of Citigroup, said even with all the uncertainty about Greece, the euro has still managed to hold its ground pretty well
CitiFX saw two potential explanations. First, investors may still expect an agreement will ultimately be reached. Second, they may think Greece is too small to matter
"We have long argued that investors are ignoring Greece at their own risk," the bank said. "We think that the risks of a credit event in Greece are non-negligible and that the uncertainty about both the second Greek bailout package and private sector involvement is here to stay
"We also suspect that a potential Greek default could unleash contagion to other fiscally weak countries in the euro zone periphery and lead to extensive FX volatility for a period of time." Against the yen, the euro fell 0.1 percent to 100.54 yen
The dollar was little changed against the yen at 76.58 yen
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 Gertrude Chavez-Dreyfuss in New York and Jessica Mortimer in London; Editing by Dan Grebler julie.haviv@thomsonreuters.com646-223-6153Reuters Messaging: rm://julie.haviv.reuters.com@reuters.net Currency bid prices at 3:58 p.m. EST 2058 GMT. All data taken from Reuters calculated from the levels at 4:30 p.m.2130 GMT in the previous New York session. Last US Close Pct YTD Pct 2011 Feb. 3 Change Change Close ------------------------------------------------------------- Euro/dlr
Official rates..
Forex Diary......
Top events.......
Diaries..........
Diaries Index.......
Press Digests....
Polls on G7 economies.
European markets.....
Keywords: MARKETS FOREX