Bloomberg News

Euro Holds Gain Before Luxembourg’s Juncker Visits Greece

August 20, 2012

Luxembourg's Prime Minister Jean-Claude Juncker

Jean-Claude Juncker, Luxembourg's prime minister and president of the Eurogroup. Photographer: Jock Fistick/Bloomberg

The euro remained higher before Luxembourg Prime Minister Jean-Claude Juncker visits Greece tomorrow to discuss the country’s request for an extension to its fiscal adjustment program.

The 17-nation currency headed for an advance versus most of its 16 major counterparts this month after Spain’s benchmark yields slid to a seven-week low, supporting the outlook for a bill auction today. Demand for the euro was tempered after Germany’s Bundesbank criticized European Central Bank bond buying. Australia’s dollar climbed after minutes of the Reserve Bank’s last meeting showed that policy makers see domestic growth overshadowing a “fragile” global outlook.

“The hurdles are still high, but European leaders do seem to be working towards more positive results,” said Callum Henderson, global head of currency research at Standard Chartered in Singapore. “This is a period of calm before a resumption of the bear trend for the euro.” The bank predicts the euro will be at $1.18 by Sept. 30, Henderson said.

The euro rose 0.1 percent to $1.2356 at 10:55 a.m. in Tokyo after climbing 0.1 percent yesterday. It was little changed at 98.09 yen. The dollar traded at 79.39 yen from 79.43.

Juncker, who also heads the group of euro-area finance ministers, will discuss a request by Greece’s Prime Minister Antonis Samaras for a two-year extension to the indebted nation’s fiscal adjustment program when he visits Athens tomorrow. Samaras travels to Berlin and Paris on Aug. 24 and 25 after French President Francois Hollande and German Chancellor Angela Merkel meet in the German capital on Aug. 23.

Greek Cuts

Greek Finance Minister Yannis Stournaras said his government is still considering 11.5 billion euros ($14.2 billion) of spending cuts for the next two years. The package will be ready by the time the so-called troika of the European Commission, ECB and International Monetary Fund returns to Athens early next month, Stournaras said on state-run NET TV yesterday after a meeting with Samaras.

Spain’s 10-year yields declined to as low as 6.16 percent yesterday, the least since July 2. That compares with a euro-era record of 7.75 percent reached on July 25. The nation is scheduled to offer 546-day and 364-day bills today.

Europe’s shared currency failed to rally from a decline against the yen yesterday when comments by Germany’s Bundesbank sparked concern policy makers will struggle to agree on measures to address the debt crisis.

‘Stability Risks’

“The Bundesbank holds to the opinion that government bond purchases by the Eurosystem are to be seen critically and entail significant stability risks,” the Frankfurt-based central bank said in its monthly report yesterday.

ECB President Mario Draghi said on Aug. 2 that the bank is working on a plan to intervene in the secondary market to lower yields in countries that ask Europe’s bailout fund to buy its bonds in the primary market, ensuring conditionality.

Australia’s dollar gained versus all of its peers after the RBA released today records of its Aug. 7 gathering, when it kept the overnight cash rate target at 3.5 percent for a second- straight meeting. The nation’s borrowing costs are the highest in the developed world.

“With inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the board judged the stance of monetary policy remained appropriate,” according to the meeting minutes. The central bank’s next gathering is on Sept. 4.

Australia’s currency rose 0.3 percent to $1.0478 and to 83.18 yen.

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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