FOREX-Euro dips on delay in Greek debt deal approval
06/02/2012 at 18:16
Updates prices, adds quote * Deadline for 2nd Greek bailout already past -EU Commission * Euro seen vulnerable to testing back below $1.30 * Dollar hits 1-week high vs yen on rise in U.S. yields By Gertrude Chavez-Dreyfuss NEW YORK, Feb 6 Reuters - The euro weakened against the dollar on Monday, after the failure of Greek coalition parties to approve the terms of a new bailout package rekindled worries about a chaotic default that could spread to other debt-ridden, euro zone countriesA European Commission spokesman said Greece had already gone beyond the deadline for finalizing talks on the second financing package from the euro zone and the International Monetary Fund, and Athens needed urgently to take decisions
Greece's coalition members must agree to painful terms of a new bailout worth 130 billion euros before euro zone finance ministers next meet. Continued failure to reach a deal would leave the prospect of an unmanaged Greek debt default when bond repayments fall due in March
A meeting of Greek political leaders to discuss reforms under the package has been postponed by a day to Tuesday.
"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 still awaited the outcome on Greece's debt deal
In late morning trading, the euro
If the impasse on Greece's debt deal persists, the euro could target $1.3026, the Feb. 1 trough, and more stop loss orders said to be below $1.3020
"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 between $1.3051-52 would support the short euro trade further, she added
Speculators trimmed net euro short positions in the week to Jan. 31 after hitting a record the previous week, though bearish bets remain at extreme levels
So far there appears some distance between the Greeks and the targets proposed by its "troika" of lenders -- the IMF, European Union and European Central Bank -- with concerns rising that Athens might be opposed to more austerity measures like labor reforms and wage cuts
The delay in approving Greece's debt deal has pushed euro/dollar implied volatility higher to 11.6 percent
Risk perception about the euro has also worsened. JP Morgan's option skew monitor suggested that demand for euro calls, reflecting bets the euro will rise, has declined in the latest week. The euro for the last two weeks has shown a positive skew, where demand for calls has outstripped that of puts
Still, the euro's ability to hold above $1.30 suggested investors still believe Athens and the troika of lenders will clinch a last-minute deal. That could give the euro a short term boost, although many investors might use a bounce into $1.32 to initiate fresh bearish positions, traders said
Against the yen, the euro fell 0.2 percent to 100.428 yen
U.S. OVERSHADOWED Friday's confidence-boosting U.S. jobs data, which showed the world's biggest economy created jobs at the fastest pace in nine months in January, helped the dollar against the yen on Monday
The dollar bought 76.570 yen
"Dollar/yen can probably rise to 77 yen, but most will probably look to fade into that move," said Jeremy Stretch, head of currency strategy at CIBC World Markets in London
He said Japanese investors were buying local stocks and were expecting more gains in the yen
The Australian dollar slipped from a six-month high hit on Friday 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 0.4 percent to US$1.0736
Additional reporting by Jessica Mortimer in London; Editing by Leslie Adler gertrude.chavez@thomsonreuters.com646-223-6322Reuters Messaging: rm://gertrude.chavez.reuters.com@reuters.net Currency bid prices at 11:52 a.m. EST 1652 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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