FOREX-Euro leaps to 2-month high vs dollar after Greek deal
09/02/2012 at 21:09
Updates prices, adds quotes, links and graphics, changes byline * ECB holds rates at 1 pct, sees signs of stabilization * Deal for Greek aid encourages traders to cut bets vs euro * BoE injects another 50 billion pounds into economy * Better-than-expected U.S. data boosts dollar vs yen By Julie Haviv NEW YORK, Feb 9 Reuters - The euro rose to a fresh two-month high against the dollar on Thursday as Greek leaders clinched a deal on reforms needed to avoid a disorderly default and Europe's central bank chief flagged tentative improvement in the euro zone economyGreece's deal removed an important obstacle for the euro, which had been trading within a narrow range as investors placed bets based on headlines. With the overhang of Greece out of the way, the euro's strength could prove to be temporary, with the focus likely shifting to larger debt-burdened countries, such as Italy and Spain
Greek political leaders clinched a long-stalled deal on reforms and austerity measures to secure a second international bailout and avoid a chaotic default, hours before the country's financial backers began meeting in Brussels
"The euro will likely see some more gains in the next few days, largely due to people taking profits on short euro positions," said Chris Fernandes, vice president, senior foreign exchange advisor for the capital markets division of Bank of the West
"While the ECB's LTRO long-term refinancing operation gives much more assurance to the euro zone, it is also flooding the market with liquidity and by pushing yields down it also puts downward pressure on the euro." The ECB's second three-year liquidity operation, or LTRO, is on Feb. 29. The central bank funnelled banks 489 billion euros at a first three-year ultra-cheap loan operation in December, a measure that had gone a long way to calm financial market turmoil
Fernandes, who is based in San Ramon, California, said he sees the euro dropping below $1.30 within the next month
"It also would not be surprising if it hits the January low," he said. "The euro, however, should fluctuate somewhere between the low-to-mid $1.30s in the second half of the year." Bank of the West's capital markets division has almost $10 billion in assets under management, which includes currencies
In afternoon New York trade, the euro was up 0.3 percent at $1.3292 after hitting a two-month high of $1.3321
< Other stories on euro zone debt crisis Factbox on new Greek austerity measures Greece's broken promises anger EU partners Greek leaders united by desire to avoid blame Euro zone in graphics Interactive crisis timeline > The ECB held rates at 1 percent Thursday but President Mario Draghi said the outlook for the economy, while uncertain, had stabilized
The euro also rallied against the yen, hitting a two-month high of 103.28
Unlike the ECB, the Bank of England said it would ease policy further by injecting another 50 billion pounds into the UK financial system. But sterling held slender gains against the dollar
EUROPE, U.S. OUTLOOKS IMPROVE An unexpected decline last week in the number of Americans applying for jobless benefits also boosted hopes for faster U.S. growth in 2012 and helped the dollar rise against the yen. The dollar last traded 0.6 percent higher at 77.46 yen
Despite fears about Europe's debt crisis, the euro ended 2011 down just 3.13 percent and has nearly recovered those losses so far in 2012
"What currency markets have been telling us all along is that the dire language we heard about a collapse of the euro" was exaggerated, said Jonathan Lewis, chief investment officer at Samson Capital Advisors, with $7.4 billion in assets
He said Samson's currency strategy is to be modestly underweight the euro but said that could eventually change to neutral
Additional reporting by Steven C. Johnson and Nick Olivari; Editing by James Dalgleish julie.haviv@thomsonreuters.com+1 646 223 6153Reuters Messaging: julie.haviv.reuters.com@reuters.net Currency bid prices at 1408 EST 1908 GMT. All data taken from Reuters calculated from the levels at 1630 EST in the previous New York session: Last US Close Pct YTD Pct 2011 Feb. 8 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