Saturday, January 21, 2012

Waiting for Greek Deal Euro Ends Lower As Investors

Waiting for Greek Deal Euro Ends Lower As Investors

Greece and its private investors appeared close to a deal to write down 50% of the face value of the country's debt by swapping existing bonds for new bonds with longer maturities and lower interest rates.
An agreement could send the euro higher, but traders were in a holding pattern until both sides reached a deal.

The goal is to slice EUR100 billion off Greece's total EUR360 billion stock of debt, leading to savings of some EUR4billion a year in interest payments.
Greece needs an agreement before a Monday meeting of euro-zone finance ministers, in order to maintain a lifeline of funding it needs to avoid a financial collapse.
The euro ended Friday at $1.2933, from $1.2968, according to EBS via CQG. This week, the euro added nearly 3 cents, helped by successful debt auctions in Spain and France. Lower government borrowing costs for many euro-zone countries reduced concerns about the continent's fiscal problems.
Ron Leven, currency strategist at Morgan Stanley in New York, says that markets are generally recalibrating expectations on global growth and that the common currency could still appreciate a little more, hitting the $ 1.30 level. "But $1.40 is not remotely achievable", Leven adds.
Before the bond sales, investors were afraid that the Standard & Poor's downgrading of the countries credit ratings earlier this month would make borrowing more difficult.
The yen also ended Friday higher against the euro at Y99.67 from Y99.99, and at Y77.02 against the dollar, from Y77.12. The greenback was at CHF0.9346 from CHF0.9322, while the U.K. pound was at $1.5576 from $1.5491.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 80.150 from 80.216.
The market is also waiting for the conclusion of the U.S. Federal Reserve's next policy meeting on Jan. 25, when the central bank will release a breakdown of when its 17 officials believe interest rates will be raised from near zero.
"The Fed next week will give an important message about its intentions", says Leven.
Another key factor for the market, according to Leven, will be the release of the first read of the fourth-quarter gross domestic product data in the US. Market consensus is for 3% growth.


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