Asia flying, and the obvious> TOKYO -- The euro surged against the dollar and yen in early Asia Monday as a Sunday agreement by euro-zone finance ministers about a bail-out package for Greece surprised and propelled investors to buy the single unit.
Under the agreement, euro-zone nations will provide up to EUR30 billion for the country in the first year of any support programs. Greece would pay an interest rate of around 5% for a three-year loan program, well below the interest rate of more than 7% on Greek sovereign debt last week.
The euro spiked to $1.3678 from $1.3495 in New York Friday and Y127.29 from Y125.64. The Australian dollar, a unit which often follows suit, strengthened to Y87.72, its highest point since Sept. 29, 2008, and to $0.9391, a five-month-high.
"It was a big positive surprise especially because investors were so pessimistic about Greece's outlook. The details made investors think that Greece can avoid defaulting," said Hideaki Inoue, a senior dealer at Mitsubishi UFJ Trust and Banking.
The euro also got a boost from the execution of many automated stop-loss buying orders, Inoue added.
Looking ahead, the euro may extend its gains to the psychologically-key $1.3700 and Y128.00 during the global day, investors said. But the unit may not be able to rise beyond these levels and any gains in the euro are likely to be fragile.
That's because the agreement about the rescue package does not mean that the economic fundamentals or fiscal conditions of Athens will drastically improve in the near-term, dealers said. Indeed, the euro has the risk of falling sharply again, if Greece's planned debt auction Tuesday fails to see solid demand. |
