Finnish parliament backs EFSF changes; troika to return to Greece
By William L. Watts and Sue Chang, MarketWatch
SAN FRANCISCO (MarketWatch) — The U.S. dollar slipped versus most major rivals Wednesday and the euro firmed as policy makers explored measures to tackle the threat of a Greek default.
The euro EURUSD +0.11% eased to $1.3616 versus the dollar after strengthening to $1.3639 earlier Wednesday but is above the $1.3607 mark from late Tuesday.
The European Commission announced that a review team from the troika of Greece’s international lenders — the European Union, the European Central Bank, and International Monetary Fund — will return to Greece Thursday. Read Market Pulse about troika’s return to Greece.
The commission also said euro-zone finance ministers would hold an extra meeting in October to discuss the situation in Greece and the possible disbursement of the next round of aid for the country if the review team makes a positive assessment of Greece’s compliance with the terms of last year’s bailout.
But earlier “gains in the euro and other high yielding currencies are evaporating quickly as investors look at the various proposals to save Greece and denial by politicians with frustration,” said Kathy Lien, director of currency research for GFT, in a note. “Their patience is being tested and the longer European officials take to announce a new bailout plan for the euro, the more skeptical everyone is becoming.”
At last check, the dollar index DXY -0.14% , which tracks the U.S. unit against a basket of six major rivals, traded at 77.666, down from 77.679 on Tuesday.
The index traded above an earlier low of 77.306, finding some support after news that orders for U.S. durable goods fell slightly in August. Read about the durable goods data.
Looking ahead, Federal Reserve Chairman Ben Bernanke is scheduled to give a speech in Cleveland at 5 p.m. Eastern.
Euro support
News on progress related to the euro zone’s debt crisis was generally upbeat Wednesday but failed to dispel lingering uncertainties over Greece.
Finland’s parliament passed legislation authorizing changes to the euro-zone bailout fund, the European Financial Stability Facility. Read Market Pulse about Finnish EFSF vote.
Remarks by European Commission President Jose Manuel Barroso helped lift the shared currency. Barroso told the European Parliament in his annual state of the union speech that he trusted the European Central Bank would continue to support the stability of the euro area and called for increased integration of euro-zone economic policies. Read pulse about Barroso.
Barroso said the Commission, which is the executive arm of the European Union, is considering a “wider guarantee” mechanism to help Greek banks lend again to the real economy. He also indicated that some form of euro-zone-wide bond could be introduced under current EU treaties.
“Markets would certainly be reassured if governments followed this route,” said Jane Foley, senior currency strategist at Rabobank in London. “That said, while [German Chancellor Angela] Merkel’s rhetoric has been particularly supportive of EMU [economic and monetary union] in recent days, the acceptance of euro bonds would be a U-turn for her.”
Barroso also outlined a proposal for a financial transactions tax, which hit bank shares but left the euro unfazed as the shared currency appeared to benefit from end-of-quarter rebalancing.
Boris Schlossberg, head of currency research at GFT, said some modest support was also provided by a report in France’s La Tribune newspaper outlining a “secret” German plan to rescue Greece by bundling Greek state assets into a special vehicle and then privatizing them.
For now, the market is taking the concept with a grain of salt as it watches more immediate developments, Schlossberg said.
Elsewhere in currencies trading, the dollar dipped versus the Japanese currency USDJPY -0.31% to fetch 76.46 yen, down from ¥76.71 on Tuesday.
The British pound GBPUSD -0.06% traded at $1.5659 versus the dollar, compared with $1.5631 Tuesday.
William L. Watts is a reporter for MarketWatch in Frankfurt.
Sue Chang is a MarketWatch reporter in San Francisco.
