FOREX-Euro near two mth highs after Greece; yen heavy
10/02/2012 at 02:12
* Euro reaction to Greek deal muted, correction eyed
* Yen softer, at 2-wk low on dlr, 2-mth low on euro
* Aussie awaits RBA comments
By Antoni Slodkowski
TOKYO, Feb 10 Reuters - The euro was steady, trading near two-month highs against the dollar and the yen on Friday after Greece agreed to a deal on reforms needed to avoid a chaotic default and destabilisation of the euro zone.
But investors wondered whether the Greeks will actually meet the harsh demands of the package and if the single currency's recent strength could prove fleeting, particularly as the problems of larger debt-ridden countries, such as Italy and Spain, are also coming into focus.
The euro was last at $1.3275
"The reaction to the deal, both for the euro and equities, was muted suggesting it has been largely priced in by the market," said Teppei Ino, currency analyst at Bank of Tokyo-Mitsubishi UFJ.
"We may see a short period of consolidation around the current levels, but problems in the euro zone are not limited to Greece. My sense is that sooner or later the euro will be hurt by them and will resume its decline," he said.
Adding to the uncertainty, euro zone finance ministers arriving for bailout talks in Brussels warned there would be no immediate green light for the rescue package. First, Greece will have to prove itself by making good on past promises that have never been implemented, they said.
"Despite the important progress achieved over the last days, we did not yet have all necessary elements on the table to take decisions today," Eurogroup President Jean-Claude Juncker said after the talks. He also said Greek parliament will not reject the agreed reform package.
Lending some support to the euro were remarks by European Central Bank chief Mario Draghi who flagged tentative economic improvement in the euro area, lessening expectations of more rate cuts. .
The ECB kept interest rates at a record low 1.0 percent on Thursday as widely expected. Draghi was non-committal on whether the bank would participate in Greece's debt restructuring, although he indicated that the bank could pass profits from its Greek bond holdings to euro zone countries.
The euro also firmed against the yen, which has softened on the back of offshore hedge fund selling prompted by Japan's shrinking current account surplus. Tokyo importers have also been spotted selling the yen.
The single currency fetched 103.13 yen,
Against the dollar, the yen was at 77.71
The Reserve Bank of Australia issues its quarterly outlook on the economy on Friday which might better explain why it skipped a rate cut this week. Any comment on the strength of the Australian dollar
The Aussie was almost unchanged compared to late New York levels at $1.0772.
Editing by Edwina Gibbs
hideyuki.sano@thomsonreuters.com+81 3 6441 1827 Reuters Messaging: hideyuki.sano.thomsonreuters.com@reuters.net
Keywords: MARKETS FOREX