Euro eases after Greek coalition deal

2011-11-07 08:25

Tokyo – The euro eased against the dollar today as investors cautiously watched developments in Greece after leaders agreed to form a coalition government following a week of turmoil over the debt crisis.

The euro fetched $1.3769 and ¥107.58 in Tokyo trade against $1.3788 and ¥107.89 in New York late on Friday.

The dollar was at ¥78.12 compared with ¥78.23.

Greek leaders clinched a historic deal yesterday to form a national unity government to try to haul the country back from the brink of economic disaster, with beleaguered Prime Minister George Papandreou saying he will step down.

The news temporarily sent the euro above $1.38 in early trade, but the single currency quickly lost steam, said Gen Kawabe, senior dealer at Chuo Mitsui Trust and Banking.

Yesterday capped a tumultuous week following Papandreou’s shock announcement last Monday that Greece would hold a referendum on the terms of its October bailout deal, which calls for further fierce austerity measures.

Even after the referendum was withdrawn, worries over broader euro zone debt crises overshadowed the market.

“The market’s focus is on the EU bailout plan (for Greece) after leaders from G20 urged euro zone nations to materialise and implement the plan,” Kawabe said.

Leaders of the world’s top economic powers Friday pushed Europe into acting to stop Italy following Greece into a debt crisis, but failed to come up with new funds to boost the International Monetary Fund’s war chest.

Lower confidence in Italy has sent its bond prices lower and yields higher.

“There is so much news flow that investors appear to be waiting it out and are sitting on the sidelines,” noted National Australia Bank’s Emma Lawson.

Market participants will also be watching a key euro zone finance ministers meeting later in the day.

The euro “remains extremely vulnerable”, Chris Go, a currency analyst with GOMarkets in Melbourne, told Dow Jones Newswires.

He said Italy will remain a major focus in the week ahead, noting the worrying rise in the country’s bond yields.

The dollar was broadly higher against major Asian currencies.

It rose to 1.2676 Singapore dollars from 1.2654 Singapore dollars on Friday, to 1 114.70 South Korean won from 1 112.10 and to 30.07 Taiwan dollars from 30.00 Taiwan dollars.

The greenback also gained to 30.68 Thai baht from 30.60, while it was unchanged at 8 970.00 Indonesian rupiah. But the unit fell to 42.90 Philippine pesos from 42.96.

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