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Euro Edges Up On News Of Greek Austerity Plans
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The failure of Greek coalition parties to approve the terms of a new bailout package weighed on the euro, and rekindled worries about a chaotic default that could spread to other debt-ridden, euro zone countries.
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However, the single currency [EUR=
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] reversed course after Greece's coalition government did accept demands by rescue creditors to cut 15,000 jobs in the public sector this year.
Public Sector Reform Minister Dimitris Reppas made the announcement Monday, as talks for the rescue deals to avoid a March default were further delayed.
Greece's coalition members must agree to painful terms of a new bailout worth 130 billion ($170 billion) euros before euro zone finance ministers next meet, with a Greek government official denying that there was a deadline for the parties to respond to.
A spokesman of the PASOK socialist party, which is a coalition partner, said on Sunday that leaders of the three parties had to give their responses on Monday.
So far there appears some distance between the Greeks and the targets proposed by the International Monetary Fund
![[cnbc explains]](http://media.cnbc.com/i/CNBC/Sections/News_And_Analysis/_News/_CNBC_EXPLAINS/_IMAGES/CNBC_explains_icon1.gif)
/European Union/European Central Bank
“troika” with concerns rising that Athens might be opposed to more austerity measures like labor reforms and wage cuts.
“Deadline or no deadline, I am not surprised,” said Jeremy Stretch, head of currency strategy at CIBC World Markets, who expected these deadlines to be flexible. “Already the euro has moved a fair bit lower this morning and a lack of movement on the Greek deal will perhaps see it grinding below $1.30.”
The euro [EUR=
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] ended the day up 0.1 percent to $1.3125. It earlier hit a low of $1.30270 after stop loss orders were tripped below $1.3050.
“Real money investors are still structurally short of the euro and if cash is not made available to Greece, it will not be good news,” Chris Walker, currency strategist at UBS.
Speculators have trimmed their record bearish bets against the euro with data from the Commodity Futures Trading Commission showing that positioning against the common currency had declined in the latest week to Jan. 31.
The euro [EURJPY=
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] fell 0.16 percent to 100.49 Japanese yen, while against the safe-haven Swiss franc, the common currency [EURCHF=
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] was 0.03 percent lower at 1.2063 francs. The Swiss central bank caps the strength of the franc at 1.20 per euro.
Still, the fact that euro was holding above $1.30 supported a view that Athens and the so-called troika of lenders will clinch a last minute deal. That could give the euro a short term boost, although many investors could use the bounce into $1.32 to initiate fresh bearish positions, traders said.
U.S. Overshadowed
Worries about Greece 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. That took the unemployment
rate to a three-year low of 8.3 percent.
The U.S. employment report sent Treasury yields sharply higher and lifted the dollar against the yen. The dollar [JPY=
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] bought 76.55 yen, having rallied to 76.809 yen at one point, its highest in over a week. Decent offers are cited between 76.80 yen to 77 yen which could cap the greenback's rise.
CIBC's Stretch said U.S. yields were once again starting to impact the dollar/yen pair, but he expected investors to sell into the greenback's rally in the 77 yen level.
“Dollar/yen can probably rise to 77 yen, but most will probably look to fade into that move,” he said. He said Japanese investors were buying local stocks and were expecting more gains in the yen.
Junya Tanase, currency strategist at JPMorgan Chase in Tokyo, said the dollar would remain under pressure against the Japanese yen despite its initial reaction to the U.S. job data.
“When you look at the historical correlation between the jobs data and the dollar/yen, you can see that positive surprises in the data tend to lead to a rise in the dollar/yen on the day of announcement,” he said.
However, that relationship fizzles out within a week and as such data surprises have little impact on the pair after that, he added. The Australian dollar slipped from a six-month high hit on Friday after surprisingly soft Australian retail sales data kept alive expectations of a rate cut by the Australian central bank on Tuesday. The Aussie [AUD=
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] fell 0.24 percent to $1.0724, below its six-month high of $1.0794 on Friday.
The Associated Press contributed to this report.
Data is a real-time snapshot *Data is delayed at least 15 minutes
