WSJ:WORLD FOREX: Euro Holds Steady Ahead Of Greek Vote, French Proposal Eyed
TOKYO (Dow Jones)--The euro was steady against the dollar Wednesday in Asia as investors awaited the outcome of a key Greek vote on austerity package due later in the day.
Greece's parliament is expected to start voting around 1100 GMT on a EUR28 billion ($40 billion) program of spending cuts and tax increases the country has promised to its international creditors.
Gains in most Asian stock markets also helped maintain market risk-sentiment, providing some support for the higher-yielding euro, dealers said.
Japan's Nikkei Stock Average rose 1.1% while South Korea's Kospi Composite gained 1.3%.
The market has largely factored in passage of the crucial austerity package by the parliament, dealers said. For that reason, if the package is rejected, market risk-sentiment will likely deteriorate sharply, prompting investors to sell off the euro and move into the safety of the greenback, dealers said.
If the austerity package passes, the euro will likely remain rangebound versus the dollar, with investor focus shifting to another phase of the Greek rescue program, dealers said.
"The focus will be increasingly on how Greek debt holders roll over bonds without being regarded as a default by ratings agencies," said Kenichiro Ikezawa, fund manager at Daiwa SB Investments.
A French-backed proposal aims at encouraging holders of Greek government debt to keep some money in Greece as their bonds mature, but an agreement on the plan remained elusive as German banks demanded assurances that the arrangement won't trigger a default.
If the Greek austerity measures pass, some profit-taking may occur, but "the potential profit-taking wouldn't be a big one, given an ECB rate hike is seen almost for certain at the upcoming meeting," said Tomohiro Nishida, senior dealer at Chuo Mitsui Trust and Banking. Nishida said the euro will likely remain in a $1.4300-$1.4400 range in the near term if the austerity package is passed.
Market participants are also likely to shift their focus to upcoming U.S. economic indicators such as Institute for Supply Management data due Friday and the European Central Bank meeting next week.
The euro was at $1.4367 from $1.4371 late Tuesday in New York, according to EBS. The euro was also at Y116.50 from Y116.56. The dollar was at Y81.07 from Y81.12 weighed by some month-end yen-buying from Japan exporters. The U.K. pound was at $1.6003 from $1.5997. The dollar was at CHF0.8304 from CHF0.8320.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 75.018 from 75.024.
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