June 28 (Bloomberg) -- The euro fell against the dollar and yen, reversing earlier gains, before Greek lawmakers vote on budget cuts needed to prevent the currency union’s first default.
The 17-nation currency slid after the Die Welt newspaper cited European Central Bank Executive Board member Juergen Stark as saying he doesn’t expect the international community to finance Greece further after July if the country doesn’t implement its austerity plan. The won snapped a three-day decline after a report showed South Korea’s current account surplus widened. The yen rose on speculation exporters bought the currency after its decline to more than one-week low.
“The market is nervous before Greece votes on austerity measures,” said Yuki Sakasai, a foreign-exchange strategist at Barclays Bank Plc in Tokyo. “The bias is for the euro to be sold on rallies.”
The euro fell to $1.4275 as of 7:09 a.m. in London from $1.4287 in New York yesterday, after earlier rising as much as 0.3 percent. The common currency slid to 115.32 yen from 115.58 yen. The dollar bought 80.78 yen from 80.89 yesterday, when it reached 80.98, the highest level since June 16.
“There is only this one plan A” for Greece, Stark said in an interview with Die Welt. Stark added that he did not doubt the will of the Greek parliament overall to implement the agreed savings plan, according to the report.
Greek Prime Minister George Papandreou called on lawmakers to obey their “patriotic conscience” and back tougher austerity measures, as they began to debate a five-year budget plan yesterday. Failure to pass Papandreou’s proposed 78 billion euros ($111 billion) of cuts and asset sales may lead to the euro area’s first sovereign default.
The euro earlier gained after France proposed a target of rolling over 70 percent of Greece’s debt. German Finance Ministry spokesman Martin Kreienbaum said in Berlin his government welcomes proposals from the private sector. German and French lenders are the biggest European holders of Greek debt.
Euro-region finance ministers are set to meet on July 3 in Brussels to advance a plan that is supposed to be approved at a follow up meeting on July 11. A deal on the rollovers is necessary to get the new aid package passed, a condition for freeing up a 12 billion-euro payment from the original bailout that Greece needs to meet 6.6 billion euros of bond maturities in August.
“I think it’s all just band-aid measures at the moment,” said Matthew Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. “I’m still firmly in the camp that euro will go lower. Europe’s not out of its problems at the moment.”
The yen rose on speculation Japanese exporters took advantage of the currency’s drop yesterday to buy it before the second quarter ends this week.
“We’re hearing many exporters bought the yen,” said Takashi Kudo, senior manager of the foreign-exchange division support center in Tokyo at NTT SmartTrade Inc., a unit of Japan’s largest phone company.
Large Japanese manufacturers forecast on average that the yen will trade at 84.20 per dollar in the year through March 2012, according to the Bank of Japan’s Tankan business- confidence survey released April 1. The BOJ will release its Tankan survey for the second quarter on July 1.
The won advanced for the first time in four days against the dollar as data from the Bank of Korea today showed the nation’s current account surplus widened last month by the most since October last year.
“Expectations that Greek creditors are probably headed toward a rollover agreement are boosting stocks and the currency,” said Ha Jun Woo, currency dealer at Daegu Bank in Seoul. “The current account, which had a surplus, also supports the won.”
The won gained 0.2 percent to 1,083.55 per dollar from 1,085.63 yesterday, when it touched 1,088.70, its weakest level since June 17.
--With assistance from Kazumi Miura in Tokyo and Seyoon Kim in Seoul. Editor: Rocky Swift
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