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Euro Depreciates Against Dollar, Yen Amid Delay in Greece Bailout Package

Thursday, 16 February 2012 | 00:51
The euro declined from a two-month high versus the yen as Greek Finance Minister Evangelos Venizelos accused some euro-area nations of wanting the Greece to leave the union.
The 17-nation currency pared losses after Luxembourg’s Jean-Claude Juncker said he is confident that euro-area finance ministers will be able to make a decision on a Greek bailout Feb. 20. The euro advanced earlier after China said it will help tackle Europe’s debt crisis. The dollar pared its gain versus the euro after Federal Reserve minutes showed some officials favored further bond buying.
“The market is very tired of false promises and that seems to be all we’re getting,” Kathy Lien, director of currency research in New York at the online currency trader GFT Forex. “It’s still up in the air whether they will get the funds by March 20, so it’s better stay on the sidelines and stay short euro-dollar.” Greece has a 14.5 billion-euro ($19 billion) bond payment due March 20. A short is a bet a currency will decline.
The euro fell 0.5 percent to 102.48 yen at 5 p.m. New York time after rising to 103.49, the strongest since Dec. 12. The shared currency declined 0.5 percent to $1.3066, sliding 1.5 percent over the past three days. The yen was little changed at 78.43 per dollar.
Juncker said the group received “strong assurances” from the leaders of the two coalition parties in Greece’s government that they will support the austerity program. He said the so- called troika of the European Commission, European Central Bank and International Monetary Fund presented its analysis on the sustainability of Greece’s public debt and Greece has set out “the required additional consolidation measures of 325 million euros” demanded by the finance ministers.
‘New Terms’
Venizelos leveled the accusation after a decision slated for tonight on aid totaling 130 billion euros ($170 billion) was postponed until Feb. 20 at the earliest.
“We are continually faced with new terms,” Venizelos told reporters in Athens today. “In the euro area, there are plenty who don’t want us anymore. There are some playing with fire, domestically and abroad. Some are playing with torches and some are playing with matches. But the risk is equally great.”
The euro has weakened 0.9 percent in the past week, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar rose 1 percent and the yen dropped 0.1 percent amid signs the euro region’s debt crisis is easing.
‘Lot of Posturing’
Paulson & Co., the $23 billion hedge fund run by John Paulson, said the euro is structurally flawed and will eventually fall apart, according to a letter the firm sent to its investors obtained by Bloomberg. The collapse may be triggered by a Greek default, which would then throw the world into recession and financial disorder.
“There’s a lot of posturing going on in the euro zone,” said Thomas Molloy, chief dealer at FX Solutions, an online currency trading company, in Saddle River, New Jersey. “There is a lot of market speculation in the background that a lot of officials outside of Greece are trying to get Greece to just pull out of the euro zone.”
China will invest in Europe’s bailout funds and maintain its holdings of the region’s assets, central bank Governor Zhou Xiaochuan said today in Beijing. With the world’s largest foreign-exchange reserves of $3.18 trillion, the Asian nation has previously signaled it wants to diversify the holdings away from dollar-denominated assets.
China Holdings
The largest foreign lender to the U.S., China decreased its holdings of Treasury securities $31.9 billion, or 2.8 percent, to $1.1 trillion in December, Treasury Department data showed today. The amount is the lowest since 2010.
International demand for U.S. financial assets cooled in December as optimism Europe would resolve its debt crisis reduced the appeal of Treasuries as a safe haven. Net buying of long-term equities, notes and bonds totaled $17.9 billion during the month, compared with net purchases of $61.3 billion the previous month.
The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, pared gains after minutes of the Fed’s Jan. 24-25 meeting showed a few members of the Federal Open Market Committee said economic conditions “could warrant the initiation of additional securities purchases before long.”
The gauge, which is weighted 57.6 percent to the euro, was 0.4 percent stronger at 79.680.
The moving average convergence/divergence is generating sell signals for the Australian and New Zealand dollars, the British pound and Canada’s dollar against the greenback, and indicate the euro is “flirting” with such an indication, according to Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto.

Source: Bloomberg
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