MW: Euro hits lowest since January after elections
‘Turbulent time’ for Greece coming, RBC says
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The euro on Monday tumbled to its lowest level versus the dollar since January and remained under pressure after European voters rejected pro-austerity candidates in weekend elections, calling into question the region’s control over its sovereign-debt crisis.
The shared currency EURUSD +0.24% slipped to $1.3055, down from $1.3095 in North American trade late Friday. The shared currency traded as low as $1.2960, according to FactSet Research data. It hasn’t closed under $1.30 since late January.
The ICE dollar index DXY +0.16% , which measures the U.S. unit against a basket of six major currencies, rose to 79.610 from 79.468 late Friday.
Analysts noted that a bank holiday in Britain created thin trading conditions, which could exaggerate moves in currency markets.
Voters in Greece’s parliamentary elections punished the country’s pro-bailout parties, denying them a majority in parliament. See more on Greek elections.
Small parties on the left and right took a large percentage of votes after campaigning against the additional austerity measures demanded by the country’s international lenders in return for a second bailout approved earlier this year.
“The breakdown in the political process may bring threats of a messy euro zone exit back into market focus,” said Elsa Lignos, senior currency strategist at RBC Capital Markets.
While popular support for staying in the bloc remains high, “the coming months look set to be a turbulent time for Greek politics, even by the standards of the last two years.”
As for France, elections on Sunday saw Socialist challenger François Hollande defeat French President Nicolas Sarkozy in a widely anticipated result. Read story on Hollande.
Uncertainty surrounds Hollande’s relationship with German Chancellor Angela Merkel. Hollande campaigned against German-led calls for austerity across the euro zone, arguing that Europe must also move to incorporate growth-oriented policies.
Merkel, meanwhile, saw her ruling coalition set back in a state election Sunday. News reports said results showed Merkel’s center-right coalition lost its majority in the state, although the final outcome remained too close to call, with the left-leaning Social Democrats and Greens also falling short of majorities.
‘Ordered off the bridge’
Michael Derks, chief strategist at FxPro, said markets fear a growing anti-austerity backlash could turn into an anti-German vendetta.
“Policy-making in Europe throughout this crisis has always been incredibly fractious but at least it had a chance of a sensible outcome with Germany at the controls. If the German captain is ordered off the bridge of the ship, then it is little wonder that markets fear Europe will rapidly run aground,” he said in emailed comments.
Against the Japanese yen, the dollar USDJPY +0.09% turned up to ¥79.94 from ¥79.88 Friday.
The British pound GBPUSD +0.14% erased a loss to trade at $1.6162, from $1.6150 in the prior session.
The Australian dollar AUDUSD +0.32% also turned up to $1.0194, down from $1.0187.
The Aussie found support after retail-sales data for March surprised to the upside, said Boris Schlossberg, director of currency research at GFT.
“The news helped to ease investor concern over another possible rate cut by the [Reserve Bank of Australia] in June after the central bank surprised the market with a 50-basis-point cut last week,” Schlossberg said. He noted that positive data were offset by weaker labor-market news amid a decline in ANZ job ads.
Deborah Levine is a MarketWatch reporter, based in New York.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
