BLBG:Euro Strengthens Against Yen, Dollar as Ministers Reach Deal on Greek Debt
The euro climbed to a three-month high against the yen and rose versus the dollar after euro-area finance ministers agreed to award Greece a second bailout package to stave off a default next month.
The 17-nation euro advanced to the strongest level in more than a week versus the U.S. currency after Luxembourg Prime Minister Jean-Claude Juncker said the deal includes a 53.5 percent writedown for investors in Greek bonds. The greenback gained against the yen before data tomorrow forecast to show U.S. existing home sales climbed last month. Australia’s currency weakened after the Reserve Bank said in minutes of its Feb. 7 meeting that there is scope to ease monetary policy.
“The details of the package plus the increase in the haircut have all come at the time when the market found itself short risk,” said Kurt Magnus, executive director of currency sales in Sydney at Nomura Holdings Inc. “The euro would be the biggest beneficiary on the initial knee-jerk reaction.”
The euro touched 106.01 yen, the most since Nov. 14, before trading 0.5 percent higher at 105.95 yen as of 7:03 a.m. in London. Europe’s common currency rose 0.3 percent to $1.3279 and earlier reached $1.3293, the strongest level since Feb. 9. The dollar gained 0.2 percent to 79.78 yen.
Euro-area finance ministers awarded 130 billion euros ($173 billion) in aid to Greece, engineered the central bank profits transfer and coaxed investor representatives into providing more debt relief in an exchange offer meant to tide the nation past a bond redemption next month.
‘Very Short Euros’
European Central Bank President Mario Draghi called the deal “a very good agreement.” Italian Prime Minister Mario Monti said private bondholders agreed to take a bigger writeoff on their Greek debt after “intense” negotiations.
The euro has gained 0.5 percent in the past week, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The dollar fell 0.7 percent over that period and the yen is down 2.5 percent.
“The euro is firming, reflecting positioning, which was very short euro,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “There’s lots of room for disappointment once we get past this deal and people start to look at the fundamentals of Greece and wonder how durable are their promises.”
Futures traders increased their bets that the euro will decline against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission showed last week.
U.S. Home Sales
The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 148,641 on Feb. 14, compared with 140,593 a week earlier.
Markets will probably remain “positive” until the ECB’s next long-term refinancing operation is held at the end of this month, according to Gibbs.
The dollar was 0.2 percent from a more than six-month high against the yen before a report forecast to show existing home sales rose to the highest since May 2010. The data may ease speculation the Federal Reserve will expand stimulus measures.
Purchases of existing homes probably rose 0.9 percent to a 4.65 million annual rate, the National Association of Realtors will say tomorrow, according to the median economist estimate in Bloomberg News survey.
“The dollar is entering a rising trend,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp., a currency margin company. “The U.S. economic recovery is picking up.”
RBA Minutes
Fed Chairman Ben S. Bernanke said on Jan. 25 he’s considering additional asset purchases and that the central bank will keep the benchmark interest rate low through at least late 2014. The Fed purchased $2.3 trillion of Treasury and mortgage- related bonds in two rounds of so-called quantitative easing that ended in June.
The dollar has climbed 4.6 percent against the yen this month and touched 79.89 yen yesterday, the most since Aug. 4.
Australia’s dollar dropped against 15 of its 16 major peers after the Reserve Bank released minutes of this month’s meeting when it kept interest rates unchanged at 4.25 percent.
The RBA board “judged that if demand conditions were to weaken materially, the inflation outlook would provide scope for a further easing in monetary policy,” the minutes said.
Australia’s currency fell 0.1 percent to $1.0745.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
