FOREX-Euro drops as Greece delays debt deal approval
06/02/2012 at 20:30
Updates prices, adds quotes, links and graphics, changes byline * 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 fell against the dollar on Monday as the failure of Greek coalition parties to approve terms of a new bailout package fanned fears a disorderly default could spread to other debt-ridden, euro zone countriesA European Commission spokesman said Greece was already past the deadline for finalizing talks on a second financing package, and needed to move urgently
"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
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
< 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 > IMF Chief Economist Olivier Blanchard said it looks like the 'haircut' on Greek private debt will be "very large" as negotiations between bondholders and the government dragged on to cut Greece's debt burden
"At current levels, the euro looks vulnerable to testing back below $1.30," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto. "We favor being short euro at $1.3070, looking for a test of $1.2860, with a stop at $1.3160." A close below the 50-day moving average of $1.3051-52 would support the short euro trade further, she added
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." The delay in approving Greece's debt deal pushed euro/dollar implied volatility higher to 11.6 percent
Against the yen, the euro fell 0.3 percent to 100.36 yen
The dollar was down 0.1 percent at 76.48 yen
The Australian dollar slipped after surprisingly soft Australian retail sales data kept alive expectations of an interest rate cut by the Australian central bank on Tuesday
The Aussie was last down 0.5 percent to US$1.0720
Additional reporting by Gertrude Chavez-Dreyfuss in New York and Jessica Mortimer in London julie.haviv@thomsonreuters.com646-223-6153Reuters Messaging: rm://julie.haviv.reuters.com@reuters.net Currency bid prices at 1:48 p.m. EST 1848 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
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Keywords: MARKETS FOREX