image by phonakins

FOREX-Euro slumps before crucial Greek vote – Reuters news and update details. I hope you will find useful information for making trading decision today.

Fri Jun 15, 2012 10:55am EDT

* Central banks' liquidity pledge reassures investors
    * Soft U.S. data keeps speculation of Fed easing alive
    * Yen broadly gains after BOJ stays on hold

    By Julie Haviv      
    NEW YORK, June 15 (Reuters) - The euro fell for the first
time in four days against the dollar on Friday as investors
turned cautious ahead of Sunday's crucial election in Greece
despite global central banks' willingness to step in to counter
any adverse fallout from the vote.      
    G20 officials told Reuters that central banks from major
economies stand ready to take steps to stabilize financial
markets by providing liquidity and preventing a credit squeeze
if the Greek election result roils markets.     
    A coordinated action is likely to support risk appetite and
provide relief to the euro although any bounce could prove
temporary given Spain's elevated borrowing costs and the risk of
contagion to Italy, the euro zone's third largest economy.      
    "People came to realize that global central bank
intervention will only emerge if something bad happens," said
Douglas Borthwick, managing director at Faros Trading in
Stamford, Connecticut.          
    "But, if the pro-bailout party wins in Greece on Sunday that
would be good news and so the euro is being sold after 
yesterday's bounce from the intervention news."         
    Volume was thin, however, and investors will likely actively
place bets on Sunday night or Monday morning, he said.  
    The euro last traded down 0.1 percent at $  1.2620,
below a three-week high hit of $  1.2672 on Monday, struck after a
100 billion euro aid package for Spanish banks was agreed at the
weekend.        
    Traders cited offers to sell above $  1.2660 up to $  1.2670
while option expiries were cited at $  1.2600.    
    Traders said the euro had scope to post short-term gains if
Greece's pro-bailout parties manage to win a majority in
Sunday's election. In a scenario where the far-left anti-bailout
parties win, the euro could drop towards near two-year lows of
$  1.2286 struck earlier this month.      
 
        
    "Investors will be reluctant to hold any meaningful
positions either way going into the weekend," said Ankita
Dudani, G10 currency strategist at RBS. 
    "The euro has come back from highs around $  1.2650 and the
only reason it will hold above $  1.2500 is because of the extreme
bearish positions and hopes of coordinated central bank action."        
    The euro has gained against the dollar this week as
investors sliced hefty positions against the currency. Data last
week showed speculator euro net shorts at a record high.        
    Uncertainty about the euro was reflected in the options
market, where both one-week and one-month implied
volatilities traded at elevated levels of 16.50
percent and 12.65 respectively, up from around 9.8 percent and
11.55 percent at the end of last week.  
    Spanish and Italian bond yields eased on Friday, but still
remained near levels considered unsustainable to borrow from 
capital markets. The deteriorating situation in the euro zone
has galvanised policymakers to consider taking action ahead of a
G20 summit next week.   
    European Central Bank President Mario Draghi said on Friday
the bank was ready to support euro zone banks, should it be
required, while Bank of Japan Governor Masaaki Shirakawa said
central banks can offer liquidity to calm markets in case the 
Greek elections heighten tension.       
    The dollar came under pressure as data reflected weakness in
the U.S. economy, raising the prospect the U.S. Federal Reserve
may resort to further monetary easing.          
    U.S. manufacturing output contracted in May for the second
time in three months and a gauge of factory activity in New York
state plunged this month, worrisome signs the American economy
is cooling.     
    Separate data showed U.S. consumer sentiment falling to a
six-month low in early June.    
    The dollar and euro also came under pressure against the yen
after the Bank of Japan announced no change in its monetary
policy. Analysts said some investors may have positioned for a
more dovish stance and were buying back the yen as a result.    
    The euro dropped 0.9 percent on the day to 99.36
yen while the dollar fell 0.8 percent to 78.74 yen,
according to Reuters data.


References

  1. ^ Reprints (www.reutersreprints.com)

Tags: , , , , , , , , ,

admin :