FOREX-Euro steady before Eurogroup, Greece checks gains

Mon Nov 12, 2012 3:13pm IST

* Euro's gains capped before finance ministers' meeting

* Greece approves budget, concerns about aid remain

* U.S. fiscal worries hits appetite for risky assets

By Anooja Debnath

LONDON, Nov 12 (Reuters) - The euro held steady just above a recent two-month low on Monday after Greece's ruling coalition secured enough votes in parliament to approve a tough 2013 budget.

Gains in the single currency were limited before a meeting of euro zone finance ministers on Monday, which was not expected to agree the release of fresh bailout funds.

Pressure to strike a deal on Greece is growing as Athens has to redeem 5 billion euros worth of treasury bills on Nov. 16 and had been counting on cash from the next aid tranche.

The euro was flat on the day at $1.2710, close to the two-month low of $1.2690 reached on Friday, on the EBS trading platform. Traders cited stop loss sell orders below $1.2680 with investors looking to sell the euro above $1.2720.

This was likely to see the euro trade in a range.

German Finance Minister Wolfgang Schaeuble told a German newspaper on Sunday that the troika of international lenders to Athens was unlikely to deliver its full report in time for the euro zone finance ministers' meeting.

"The key issue will be what comes out of the Eurogroup meeting. If the tranche is released it is positive for risk and we should see a reasonable bounce in the euro, given the pessimism that's been built into the markets about the euro area," said Raghav Subbarao, FX strategist at Barclays.

While the passage of the budget removed some of the near-term uncertainty surrounding Greece, the euro is likely to remain under pressure until an agreement on how to make Greek's debt more sustainable is reached.

Richard Hastings, macro strategist at Global Hunter Securities, said that while the euro could come under pressure as investors hedged some of the risks associated with the Nov. 16 Greece funding deadline, he expected a deal.

"We should emphasise that when it comes to distressed finance, deadlines are not as hard as they seem, and deals are surprisingly spontaneous at any moment," he added.

Any euro bounce, though, could be short-lived as recent economic data has shown the crisis which started in the euro zone periphery is spreading to its core, with German growth likely to slow in coming quarters and France likely to slip into recession.

U.S. FISCAL WORRIES

Concerns about the so-called U.S. fiscal cliff has seen safe-haven flows into the dollar and kept it near a two-month high against a basket of currencies.

Demand for riskier currencies has been sluggish as investors fret about the possible impact of some $600 billion in expiring tax cuts and spending reductions due to take effect in January.

Currency speculators favoured the U.S. dollar in the latest week for the first time since early September, according to data from the Commodity Futures Trading Commission released on Friday.

The dollar bought 79.44 yen, flat from Friday when it fell as low as 79.07 yen, its weakest in nearly three weeks.

Markets shrugged off a 0.9 percent July-September quarter-on-quarter contraction in Japanese economic output, in line with forecasts. This was the first negative reading in three quarters but it added to fears that slowing global growth is pushing the economy into recession.

Morgan Stanley held to its medium-term view that the yen would weaken and said it expected dollar/yen to resume its uptrend.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Diwali Sales

Diwali Sales

Gold sales jump about 20 pct for Diwali - trade body  Full Article 

World Bank Rival

World Bank Rival

Three major nations absent as China launches W.Bank rival in Asia  Full Article 

Wal-Mart India

Wal-Mart India

Murali Lanka appointed as Wal-Mart India operations chief  Full Article 

Microsoft Earnings

Microsoft Earnings

Microsoft sales beat Street hopes, cloud profits up.  Full Article 

Special Report

Special Report

Why Madrid's poor fear Goldman Sachs and Blackstone  Full Article 

U.S. Economy

U.S. Economy

Spectre of no-inflation world looms over Fed's return to normal  Full Article 

Insider Trading

Insider Trading

Rengan Rajaratnam, SEC to settle civil insider trading charge.  Full Article 

Market Watch

Market Watch

Betting on the beaten up? Investors pin hopes on stocks in Europe, Japan.  Full Article 

India Insight

India Insight

Kalki Koechlin on her role as a disabled girl in “Margarita, With a Straw”  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage