FOREX-Euro slips to two-month low after Greek aid delay

Tue Nov 13, 2012 3:23pm IST

* Euro zone, IMF clash over Greek debt target date

* Greece to roll over T-bills on Tuesday to avoid default

* Another euro zone meeting planned on Nov 20

* Dollar index hits two-month high

By Philip Baillie

LONDON, Nov 13 (Reuters) - The euro fell to a two-month low against the dollar on Tuesday after international lenders stopped short of giving further aid to debt-stricken Greece, denting the single currency's short-term outlook.

The euro fell 0.3 percent to $1.2666, its lowest since Sept. 7. It also hit a one-month low against the yen of 100.35 yen.

More losses could see the euro head towards support at $1.2640, its 100-day moving average, although traders said a reported options expiry at $1.27 could keep it close to that level and limit its falls.

Euro zone finance ministers agreed to grant Athens two more years to reach its budget goal. But the IMF and the euro zone were at loggerheads over a longer-term target date to shrink the country's debt pile.

"It's clear the euro is under some pressure and just looking at how the bond markets are playing out this morning, with German and Spanish yield spreads widening, that is building uncertainty and negativity once again," said Jeremy Stretch, head of currency at CIBC world markets.

"The open dispute between the euro zone and the IMF is hardly encouraging ... so it looks like the euro is going to remain on the defensive."

The euro's falls helped the dollar rise to a two-month high against a basket of currencies, with its index hitting 81.225.

The euro has fallen steadily since hitting a peak of $1.3140 in mid-October as the euphoria over a European Central Bank bond-buying scheme faded.

While market players expect Greece to get by this week without the aid money it was counting on, uncertainty over its short-term financing and long-term debt reduction plan was enough to put off investors.

Greece was due to sell treasury bills on Tuesday to refinance a 5 billion issue maturing on Friday.

Investors will also look to Germany's ZEW sentiment survey for November at 1000 GMT. A weak reading may add to selling pressure on the euro.

Eurogroup Chairman Jean-Claude Juncker said on Monday another Eurogroup meeting would take place on Nov. 20, before the EU summit from Nov. 22, though officials said more talks could be required the week after that to nail down a new deal.

"Few people would think that the euro zone will desert Greece. Still, the market will be frustrated by lack of a clear picture. I expect the euro to keep falling gradually," said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank in Tokyo.

ANOTHER FISCAL PROBLEM

On top of euro zone concerns, worries about recession in the United States if policymakers in Washington fail to resolve the fiscal cliff of automatic spending cuts and higher tax rates due to kick in early next year undermined risk appetite.

This weighed on equity markets and helped the dollar against riskier currencies. It hit a two-month peak against the Swiss franc of 0.9511 francs.

However, the U.S. currency fell against the safe-haven Japanese yen, losing 0.25 percent to 79.26 yen though it stayed above a 3 1/2-week low of 79.07 yen hit on Friday.

The yen often tends to outperform when risk appetite wanes because of Japan's net creditor status.

REUTERS EXCLUSIVE

Reuters Showcase

Documents' Leak

Documents' Leak

India widens oil leaks probe to defence ministry  Full Article 

Jim O’Neill Interview

Jim O’Neill Interview

'India can become world’s fifth-largest economy by decade’s end'  Full Article 

Food Security

Food Security

India will not cut multi-billion dollar food handout programme - PM  Full Article 

Ola's Expansion Drive

Ola's Expansion Drive

Taxi group Ola steps up expansion drive  Full Article 

Sahara Saga

Sahara Saga

Sahara's Grosvenor House hotel in London put up for sale   Full Article 

Suzlon Energy

Suzlon Energy

Suzlon expects to turn profitable in fiscal 2016: chairman   Full Article 

Eicher Motors Stake

Eicher Motors Stake

Volvo selling up to $300 mln worth of Eicher shares  Full Article 

Beef Trade

Beef Trade

Maharashtra clamps down on beef trade through new act  Full Article 

Budget 2015

Budget 2015

Budget announcements and reactions from the industry  Full Coverage 

Reuters India Mobile

Reuters India Mobile

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