Euro falls against dollar as meeting on Greek loan looms
London (Feb 20) The euro pulled back against the U.S. dollar Friday, with market participants taking a wait-and-see stance ahead of crucial events such as the eurozone finance ministers’ meeting on the Greek bailout.
The euro EURUSD, -0.41% bought $1.1327, compared with $1.1369 late Thursday in New York, ahead of the finance ministers’ gathering to discuss Greece’s request to extend its loan agreement. On Thursday, the request was dismissed by Germany. The finance ministers were scheduled to meet in Brussels at 3 p.m. local time, or 9 a.m. Eastern Time.
Greece has little more than a week before its €240 billion ($273 billion) bailout expires at the end of February. If it fails to negotiate a new deal, the government will be left without financing and its banks at risk of being completely cut off from the lending facilities of the European Central Bank.
This week, the euro has traded in the narrowest of ranges since the start of the year, analysts at Brown Brothers Harriman said Friday. They also noted that Feb. 28 “might not be the hard and fast deadline of all deadlines that it is made out to be,” as it is on March 5 that Greece’s first payment of about €300 million euros to the International Monetary Fund is due. Also on that day, Greece has about €1.4 billion in Treasury bills maturing that need to be rolled over.
“This could prove difficult, as foreign investors are not keen and Greek banks’ interest is curtailed by falling deposits and limits on using [emergency liquidity assistance] funds to finance the government,” wrote Marc Chandler, global head of currency strategy at BBH, who also pointed out that the European Central Bank will meet on March 5 in Cyprus.
Overall, “despite the lack of an agreement to the extension of the existing bailout, EURUSD has held up relatively firmly, and other risk assets such as equity indices remain near their all-time highs,” said Angus Campbell, senior analyst at FxPro, in a note.
Elsewhere, the dollar USDJPY, -0.28% against the Japanese yen traded at ¥118.74, from ¥118.97 late Thursday in New York.
The U.S. currency earlier Friday hit as high as ¥119.10, due to dollar buying by Japanese importers related to their regular commercial trade settlement in the morning.
The dollar has tentatively stayed below the ¥119 mark, as investors wait to see the outcome of the eurozone finance ministers’ meeting later Friday.
U.S. stocks slipped Thursday as investors focused on negotiations over Greece’s bailout and a renewed decline in oil prices. Meanwhile, Wal-Mart shares slipped as the retailer said it would boost the wages of its U.S. workers.
Currency market participants are also now looking ahead to Fed Chairwoman Janet Yellen’s testimony before Congress on Feb. 24-25.
“The biggest reason behind the directionless trade in the dollar-yen pair is the swaying market consensus over the timing of the U.S. interest rate increase,” said Daiwa Securities FX strategist Yukio Ishizuki in a note.
“We could even say it’s the biggest chance (for the Fed) to normalize its interest policy in June. We are wondering what kind of messages (Yellen) would send to the market.”
The WSJ Dollar Index BUXX, +0.01% , a measure of the dollar against a basket of major currencies, was up fractionally at 85.48.
Source: MarketWatch
