Bloomberg News

Euro Rises for First Time in 4 Days Versus Dollar, Yen on Greece

June 27, 2011

June 27 (Bloomberg) -- The euro snapped three-day slumps against the dollar and the yen amid optimism Greece’s parliament will approve austerity measures to help avert the currency bloc’s first default.

The shared currency rose versus the majority of its most- traded peers as the German government welcomed proposals from French lenders on voluntary participation in a roll-over of Greek debt. Stocks rose. New Zealand’s dollar was the biggest loser against the euro as the nation’s trade surplus narrowed.

“France and Germany are giving people confidence,” said Brian Taylor, chief currency trader a Manufacturers & Traders Trust in Buffalo, New York. “The optimism in the equity market today is helping the euro, and people are feeling good that a deal might be struck. We are not buying it because we’re not confident enough yet in what we’re hearing.”

The euro gained 0.7 percent to $1.4287 at 5 p.m. in New York, from $1.4188 on June 24. It climbed 1.3 percent to 115.58 yen, from 114.13. The dollar appreciated 0.6 percent against the Japanese currency to 80.89 yen, from 80.43.

“We will be capped on this present move at $1.4325,” Taylor said.

The Swiss franc, which reached a record high 1.1806 per euro last week amid investor concern Greek lawmakers would be unable to pass the austerity plan, fell for the first time in four days. It declined 0.9 percent to 1.1932 per euro.

Greek lawmakers are starting debate today on the five-year, 78 billion-euro ($111 billion) package of budget cuts and asset sales that officials say is needed to receive a loan payment and future financing from the European Union and the International Monetary Fund.

‘Institutional Desire’

“There is a tremendous amount of institutional desire not to see Greece default, and that is what the market is beginning to understand,” said Boris Schlossberg, director of research at the online currency trader GFT Forex in New York. “As difficult as it may be, the Greek parliament will pass the austerity measures and the market is breathing a sigh of relief.”

Greek creditors may be headed toward an agreement to roll over 70 percent of their bonds into longer-maturity debt to prevent a default. France proposed the 70 percent target after talks last week with banks. German Finance Ministry spokesman Martin Kreienbaum said in Berlin his government welcomes proposals from the private sector. Talks with German financial institutions are proceeding, he said.

German and French lenders are the biggest European holders of Greek debt. European banks hold 17.2 billion euros of Greek bonds maturing by the end of 2013, Citigroup Inc. estimated in a June 23 report.

Gained for Month

The euro gained 1 percent over the past month in the Bloomberg Correlation-Weighted Indexes, which track the currency against those of nine other developed nations. The dollar advanced 1.3 percent.

The greenback extended losses versus the euro as stocks rose after global regulators announced rules to safeguard the world’s financial system. They said banks deemed too big to fail must hold as much as 2.5 percentage points in additional capital as part of efforts to prevent another financial crisis.

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, fell 0.5 percent to 75.313. The Standard & Poor’s 500 Index climbed 0.9 percent.

U.S. consumer purchases stalled in May, the weakest outcome since June 2010, after a revised 0.3 percent gain the prior month that was smaller than previously estimated, Commerce Department figures showed today in Washington.

U.K. Business

The pound strengthened against the yen after the Lloyds TSB Business Barometer index for business activity in the next 12 months rose to 46 in June, the highest since May last year, while a Lloyds index for current economic optimism increased to 36 from 14.

The pound appreciated 0.8 percent to 129.36 yen and rose 0.2 percent versus the dollar to $1.5990.

New Zealand’s dollar, nicknamed the kiwi, slumped after a report showed the trade surplus narrowed in May more than forecast. The currency fell 0.7 percent to 80.58 U.S. cents. The kiwi earlier touched 80.09 cents, the weakest since June 16. It declined 0.2 percent to 65.19 yen.

The nation’s trade surplus was NZ$605 million ($485 million) in May, the statistics office said in Wellington, compared with the median estimate in a Bloomberg News survey of economists for a NZ$1 billion surplus.

The Thomson Reuters/Jefferies CRB index of raw materials fell 0.4 percent in its fourth consecutive day of losses, the longest losing streak in more than a month.

Canada’s dollar rose from a three-month low against the dollar as stocks advanced. It earlier touched the weakest level in more than three months after futures traders reduced bets the Bank of Canada will raise interest rates in 2011.

The Canadian currency gained 0.2 percent to 98.65 cents per U.S. dollar after earlier depreciating as much as 0.3 percent to 99.13 cents, the weakest level since March 17.

--With assistance from Lucy Meakin in London, Helene Fouquet in Paris, Aaron Kirchfeld in Frankfurt and Chris Fournier in Halifax. Editors: Greg Storey, Dave Liedtka

To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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