DJ WORLD FOREX: Euro Tumbles On Renewed Worries Over Greek Debt
By Fabio Alves
OF DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Speculation that Greece will seek aid from the International Monetary Fund caused the euro to tumble against rivals Thursday morning.
The selling intensified as investors exited the European trading session.
The euro sank to a one week low against the yen and the dollar, falling 0.9% against the dollar. The common currency slumped to a nearly 17-month low against the Swiss franc, at CHF1.4458, though there were no signs of intervention from the Swiss National Bank.
Greece has ratcheted up pressure for financial help ahead of the European Union summit next week. A senior Greek official said Thursday Greece may seek IMF aid over the April 2-4 Easter weekend, during a trip to the IMF headquarters in Washington, because Athens holds out little hope for aid resulting from the EU summit.
"As markets realize that the recent 100 basis points decline in the Greek-German 10-year [government bonds] spread was founded on anticipation of a Greek deal rather than an actual package, they will find little resistance in driving back down the euro towards its February lows of $1.34," said Ashraf Laidi, chief market strategist at CMC Markets in London.
Investors are getting increasingly anxious about Greece's sovereign debt problems as the country has a significant amount of debt coming due in April and there's still no concrete financial rescue package in place to ease concerns.
"Three months have elapsed since the last credit downgrade of Greece and still no credible solution on how it will obtain EUR65 billion to meet its short term debt obligations," Laidi said.
The political back-and-forth around a bailout has pushed the cost of protecting against a Greek default higher, reaching 307.5 basis points, equivalent to EUR307,500 in annual premiums to insure EUR10 million in debt for five years Thursday from the close Wednesday at 285 basis points, or EUR285,000.
"[Speculation of IMF aid] reminds investors that the Greek crisis has not been fixed," said Jane Foley, a research director at Forex.com in London. "The market is becoming increasingly aware of Greece's rollover that needs to be done in the Spring ... so Greece remains pretty close to a funding crisis."
Late morning Thursday in New York, the euro was at $1.3625 from $1.3737 late Wednesday, according to EBS via CQG. The dollar was at Y90.56 from Y90.25, while the euro was at Y123.50 from Y124.01. The U.K. pound was at $1.5283 from $1.5320. The dollar was at CHF1.0594 from CHF1.0549.
The ICE Dollar Index, which tracks the U.S. currency against a trade-weighted basket of currencies, was at 80.074 from 79.726.
Demand for the euro as well as other higher-yielding currencies waned overnight after comments by Greek Prime Minister George Papandreou.
Papandreou asked that European Union leaders at their summit next week agree to a package of standby loans to restore confidence in the country's debt.
He also confirmed that Greece is keeping its aid options open, but would prefer help from the European Union to a bailout by the International Monetary Fund.
The prime minister has spoken with the IMF and said that the tough fiscal austerity measures Greece has put in place already conform with IMF requirements.
The Greek Finance Ministry Thursday denied reports that the country might seek support from the IMF.
"Greek officials have denied press reports that it will go to the IMF in early April if not satisfied with the results of the EU summit. But even in the denial, it seems to affirm that is a choice open to it," Win Thin, a currency strategist at Brown Brothers Harriman in New York, wrote in a note to clients.
Meanwhile, currency markets showed little reaction to U.S. economic data, including weekly jobless claims and the consumer price index for February, both largely in line with consensus estimates.
U.S. consumer prices were flat in February from the previous month as higher car prices were offset by lower energy costs, leaving scope for the Federal Reserve to keep supporting the economy with record-low interest rates.
The Labor Department said in its weekly report Thursday that initial claims for jobless benefits fell by 5,000 to 457,000 in the week ended March 13. The previous week's level was left unrevised at 462,000.
-By Fabio Alves, Dow Jones Newswires; 212-416-2204; fabio.alves@dowjones.com |
