Bloomberg News

Euro Rises Versus Dollar, Yen as Greece Approves Austerity Plan

February 14, 2012

Feb. 13 (Bloomberg) -- The euro approached a two-month high against the dollar after Greek Prime Minister Lucas Papademos won approval from parliament for austerity measures needed to receive a second aid package.

The 17-nation currency also advanced against the yen and the British pound. Greece’s vote on spending cuts puts the spotlight on a meeting of euro-area finance ministers, who must decide whether to release the international rescue. Australia’s dollar strengthened before a report that economists said will show U.S. retail sales rose last month, boosting demand for higher-yielding assets.

“A lot of optimism is in the price as the market expects that Greece will be able to secure money to avoid an outright default,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mistubishi UFJ in London. “But the overall problem is still far from being resolved. We see the euro’s gain as being short-lived.”

The euro rose 0.4 percent to $1.3255 at 6:56 a.m. New York time, after reaching $1.3322 on Feb. 9, the highest level since Dec. 12. It advanced 0.5 percent to 102.94 yen and rose 0.1 percent to buy 83.87 British pence. The European common currency has gained 2.2 percent against the dollar this year. The yen was little changed at 77.68 per dollar.

With weeks remaining before Greece faces a 14.5 billion- euro bond payment, the bill paves the way for a 22 percent reduction in the minimum wage, smaller pensions and job cuts.

Focus on Brussels

Greece was granted its first aid package of 110 billion euros in May 2010.

“We remain cautious about the euro prospects for now,” Valentin Marinov, a senior currency strategist at Citigroup Inc. in London, wrote in an e-mailed note. “Some risks remain in the very near term with regards to the conditions under which Greece will be able to use the bailout funds.”

The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro against the dollar compared with those on a gain -- so-called net shorts -- was 140,593 on Feb. 7, according to figures from the Commodity Futures Trading Commission. That compares with net shorts of 157,546 a week earlier.

German bonds fell as the approval by the Greek parliament reduced appetite for the safest assets. The German 10-year bund yield rose six basis points to 1.96 percent.

Norwegian Currency

The euro has gained 0.6 percent over the past week, the third-best performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes after the Norwegian krone and the Swedish krona. The yen, the worst performer, dropped 2 percent, the worst performer, while the dollar has lost 0.4 percent over the same period.

The Norwegian krone rose against the dollar and the yen even after its financial regulator warned that the country faces “severe” imbalances in its credit and property markets as households continue to amass debt at unsustainable levels.

“Growth rates on household debt and house prices are not following a sustainable path,” Morten Baltzersen, director general of the Financial Supervisory Authority in Oslo, said in an interview. “The longer these developments go on, the greater the risk is of a severe imbalance evolving.”

The krone strengthened 0.4 percent to 5.7227 per dollar. It was little changed against the euro at 7.5811.

Japan GDP

The yen fell against all 16 of its major peers as Japan’s economy shrank at an annualized 2.3 percent in the fourth quarter amid slumping exports that undermined a recovery from last year’s record earthquake. The contraction compared with the median forecast for a 1.3 percent decline in a Bloomberg News survey of economists.

The report underscores pressure on Bank of Japan officials meeting today and tomorrow to consider more monetary easing as gains in the yen worsen losses for exporting companies such as Sony Corp. and Panasonic Corp.

Japan’s Finance Minister Jun Azumi reiterated at a parliamentary budget committee session in Tokyo that he’ll act on excessive and speculative moves in the currency. Japan spent 14.3 trillion yen in intervention operations last year to stem gains in the currency as it rose to postwar records against the dollar, hurting the nation’s exporters.

The greenback declined against Australia’s dollar for the first time in four days before Commerce Department figures tomorrow that economists estimate will show a 0.8 percent gain in U.S. retail receipts in January, according to the median forecast of economists surveyed by Bloomberg. That would follow a 0.1 percent advance in December.

“Economists have underestimated the upside to the U.S. retail report,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “It’s probably likely to weaken the U.S. dollar.”

The Australian dollar gained 0.8 percent to $1.0754.

--Editors: Mark McCord, Dennis Fitzgerald

To contact the reporter on this story: Anchalee Worrachate in London at; Candice Zachariahs in Sydney at

To contact the editor responsible for this story: Daniel Tilles at

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