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Euro Fluctuates Amid Greek Sovereign-Debt Negotiations; Real Rallies

Thursday, 09 February 2012 | 00:43
The euro fluctuated against the dollar amid speculation Greek Prime Minister Lucas Papademos and coalition party leaders will fail to agree on terms required for a bailout.
The Dollar Index rose from its weakest level in two months on demand for a refuge as Greek political leaders were locked in discussions with Papademos on the 130 billion-euro ($172 billion) bailout. The yen fell against the majority of its major peers as Japan’s current-account surplus slid to a 15-year low in 2011. Brazil’s real rallied even as the central bank bought dollars in the forwards market.
“There’s a bit of fatigue setting in and the markets are a little bit less reactive than they’ve been,” said Robert Sinche, global head of currency strategy at Royal Bank of Scotland Plc in Stamford, Connecticut. “The euro continues to be reasonably well bid. The market came to realize that ‘haven’t made a decision’ is not bad.”
Europe’s shared currency was little changed at $1.3260 at 5 p.m. New York time after reaching $1.3289, the most since Dec. 12. The euro was 0.4 percent stronger at 102.16 yen after earlier touching 102.45, the strongest level since Dec. 21. The yen weakened 0.4 percent to 77.04 per dollar.
Greece’s Papademos negotiated with political leaders in Athens after delaying the gathering for a second time in as many days. Greece will pledge permanent spending cuts, including lower pension payments and a 20 percent reduction in the minimum wage, as the economy contracts this year at a faster pace than originally estimated, according to the draft of a new financing deal with the European Union and International Monetary Fund.
Sovereign-Debt Crisis
Euro-area finance ministers are due to gather tomorrow in an emergency meeting in Brussels.
The euro has fallen 3.5 percent over the past three months, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as the region’s sovereign-debt crisis damped demand for the currency. The dollar fell 1.2 percent in the period and the yen was little changed.
Brazil’s real rallied even as the central bank intervened in the currency market for the second time in under a week at 1.7339 reais. The real rose 0.3 percent to 1.7206 per dollar.
The yen dropped after the Finance Ministry in Tokyo said Japan’s current-account surplus shrank 44 percent in 2011 from the previous year to 9.63 trillion yen ($125 billion), the lowest since 1996. Japan’s trade surplus makes the currency attractive as a haven because it means the nation doesn’t have to rely on overseas lenders.

Source: Bloomberg
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