By William L. Watts and Lisa Twaronite, MarketWatch
LONDON (MarketWatch) — The dollar regained some lost ground versus the euro Tuesday, with nervous traders reluctant to hold the European currency ahead of Greece’s eagerly awaited austerity vote later this week.
The euro EURUSD +0.19% fetched $1.4265, compared with $1.4275 in late North American trading on Monday. Earlier Tuesday, the euro rose as high as $1.4320, but those gains unraveled. See real-time currency quotes and tools.
“While euro/dollar is trading off its recent lows, it seems unlikely that the euro will gather much upward momentum ahead of this week’s crucial votes,” said Jane Foley, senior currency strategist at Rabobank. “The top of the daily cloud at $1.4397 is likely to act as resistance near term.”
Strategists at UBS Investment Research said concerns about Greece weren’t the only factor.
The U.S. Federal Reserve’s “clear message on near-term monetary policy has probably hit investors who were still positioned” for a third round of quantitative easing, they said. Many investors now believe so-called QE3 is no longer as likely as some had thought.
Moreover, falling commodity prices should weigh on the euro, “as current correlations stand.” Prices of dollar-denominated commodities such as oil typically move inversely to the greenback. Read more on crude-oil futures.
Greece’s parliament will vote this week on an austerity plan needed to secure a €12 billion ($17 billion) round of bailout funds, and to move it closer to an additional aid package from the European Union and International Monetary Fund. Read more on Greece.
A vote on the austerity measures is expected Wednesday, followed by a vote on implementation legislation on Thursday. Greece’s main opposition party has said it will vote against the austerity measures.
Greek Prime Minister George Papandreou’s Pasok party holds a five-seat majority in the 300-seat legislature and some members have threatened to vote against the package.
Meanwhile, French banks on Monday proposed a plan to roll over half of Greek government bonds that mature in the next three years into new 30-year bonds, with a further 20% set aside to guarantee repayment, news reports said.
“This plan will not fix Greek’s budgetary and structural deficiencies or stop the country mounting up more debt — only the Greek people and parliament can fix the underlying problem,” Foley said. “However, the French plan counters default risk over the next couple of years and may help restore some calm to the markets.”
The dollar index DXY -0.12% , which measures the performance of the U.S. unit against a basket of six other currencies, rose to 75.358 from 75.338 Monday.
The Australian dollar AUDUSD +0.38% rose to $1.0455 from $1.0436 Monday.
The British pound GBPUSD -0.11% slipped to $1.5922 from $1.5979.
Against the yen, the dollar USDJPY -0.0804% bought ¥80.87, compared with ¥80.86 late Monday.
