As European leaders punt, currency investors are left anxious
By Deborah Levine and Lisa Twaronite, MarketWatch
NEW YORK (MarketWatch) — The dollar gained on its European rival Monday as investors awaited the outcome of a Greek vote Tuesday that could pave the way for the debt-plagued country to get another round of bailout funds.
A weekend decision by European leaders to wait for Greece to take the next step disappointed markets, which expected a more solid decision to back Greece, even as political turmoil played out in Athens and politicians there faced whether to enact deep spending cuts in spite of large protests.
The euro EURUSD +0.13% slipped to $1.4265, down from $1.4290 in late North American trading Friday.
The shared currency has lost 1.2% this month as investors’ confidence in Greek and European leaders ability to keep Greece from default fades.
The dollar index DXY +0.25% , which measures the performance of the U.S. unit against a basket of six other currencies, rose to 75.191 from 75.092 Friday. See real-time currency quotes and tools.
Finance ministers from the 17 countries that use the common currency met Sunday and said that a new financing strategy for Greece will be defined by early July. Read more on Eurogroup and Greece.
Ministers had been meeting about approving of the release of a 12-billion-euro ($16.8 billion) installment of Greece’s $155 billion aid package.
Greece will get the next round of its existing billion bailout package in early July, if it can pass new spending cuts and economic reforms by the end of the month, Jean-Claude Juncker, chair of the Eurogroup finance meetings, reportedly said.
“We have to, of course, await this vote” by the Greek parliament, Juncker said as he left the meeting early Monday morning, according to an Associated Press report. Juncker is also the prime minister of Luxembourg.
Greece is expected to vote on the contentious news spending cuts on Tuesday.
Ahead of the vote, the International Monetary Fund’s softened stance toward a bailout makes it “very likely that Greece will receive the next tranche of funding (thereby avoiding a near-term default) no matter what the outcome of this week’s confidence vote,” said Sara Yates and David Forrester, currency strategists at Barclays Capital.
“While these positives lessen the potential for short-term calamity, a failure of the Greek government to win the confidence vote” would “not be received well by the markets,” they said in a note to clients Monday.
Although they said they expect the vote to pass, they added that they “do not think the risk-reward favors being long” the euro ahead of the vote. But assuming the vote is successful, they expect the euro to appreciate as European officials “move toward agreement and steady the market,” they said.
Against the Japanese yen, the dollar USDJPY +0.03% edged up to ¥80.28 Monday, compared with ¥80.08 Friday.
Currency investors had a muted reaction to data released early Monday that showed Japan’s trade deficit rose more than expected to its widest level since 2009, as exports fell 10.3% from a year earlier in the wake of the March 11 disaster. Read more on Japan trade data.
The British pound GBPUSD +0.19% turned up slightly to $1.6184, from $1.6169 Friday.
Deborah Levine is a MarketWatch reporter, based in New York.
Lisa Twaronite is MarketWatch's Tokyo bureau chief.
