FOREX-Euro rises on signs of success for Greek debt swap

Fri Mar 9, 2012 2:58am IST

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* Greek debt swap plan exceeds minimum 75 pct acceptance bar

* Final tally of those pledging debt to plan due at 0600 GMT

* ECB Draghi sees stabilization in euro zone economy

* Yen drops on current account deficit data

By Daniel Bases and Julie Haviv

NEW YORK, March 8 (Reuters) - The euro rose against the U.S. dollar and yen on Thursday after Greece's bond swap deal closed with enough participation for the debt deal to go through, allowing Greece to avoid a disorderly default.

Greece officials reported very high levels of take-up by private creditors for the deal. One senior Greek government official said that take-up had neared 95 percent before the expiration of the deadline at 3 p.m (2000 GMT).

"There was the expectation that it would get done but now there is maybe a sigh of relief in the market that it is getting done with less messiness, and that is helping risk sentiment," said Brian Kim, currency strategist with the Royal Bank of Scotland in Stamford, Connecticut.

Athens had said it would need at least a 75 percent participation rate for the deal to go through. The debt swap is critical to Greece receiving 130 billion euros in international rescue funds, which are needed ahead of a March 20 deadline on a bond repayment.

The euro hit a session high of $1.3291 and last traded at $1.3266, up 0.89 percent, according to Reuters data.

The uncertainty over whether the deal would get done has played havoc on the market, with prices see-sawing in the weeks leading up to Thursday's deadline.

"Selling the dollar was the knee-jerk reaction, but I don't see too much conviction in the selling because of tomorrow's payrolls data," Kim said

The U.S. Labor Department is due to release its monthly jobs report on Friday. Kim said that if the report shows a strong figure above 200,000 new jobs added in February, the greenback would likely strengthen against the euro, yen and sterling.

Credit Suisse said looking beyond the immediate reaction to Greece's private-sector involvement, the euro remains moderately vulnerable, if only because rate differentials keep moving in the dollar's favor after the European Central Bank's Longer Term Refinancing Operation.

The ECB'S operation to inject liquidity into the financial system did allay market concerns about bank funding, but some are viewing it as tantamount to quantitative easing.

Meanwhile, European Central Bank President Mario Draghi said he saw a positive impact from the bank's pumping of a trillion euros into the banking system.

ECB staff forecast the economy could shrink by 0.5 percent this year and at best grow by a meager 0.3 percent, a slight downgrade of its previous estimate.

Draghi's comments were viewed by some as downplaying another cheap money operation and that February's injection would not be repeated any time soon.

YEN UNDER PRESSURE

The euro rallied versus the yen and last traded at 108.26 , up 1.42 percent.

The dollar strengthened 0.52 percent to 81.58 yen. The yen was knocked lower after Japan's current account swung to a record deficit in January, the first in three years. Traders reported offers at around a recent nine-month dollar high of 81.87.

The currency is stuck in the band of 81.87-80.50, formed by this year's high and the 23.6 percent retracement of its February rise.

Sterling rose 0.50 percent to $1.5821.

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