BLBG:Euro Falls From Two-Week High Versus Dollar on Greek Talks, Stock Losses
The euro declined from a two-week high against the dollar as European stocks fell and Greek officials and private creditors struggled to reach agreement on a debt swap plan.
The dollar strengthened versus all but one of its 16 major counterparts as investors sought the relative safety of the U.S. currency. The 17-nation euro still headed for its first weekly gain in seven weeks after Spain and France sold bonds at lower yields yesterday in their first auctions of medium and long-term debt since being downgraded by Standard & Poor’s last week.
“The euro remains a very vulnerable currency,” said Jane Foley, a senior currency strategist at Rabobank International in London. “There is still an awful lot to be done in Greece. Politically nothing has changed since last year and there’s still a lot of pain to come. I am still quite wary about this upside we’ve seen in the euro.”
The common currency fell 0.5 percent to $1.2903 at 10:23 a.m. London time after rising to $1.2986, the highest since Jan. 4. The decline trimmed its weekly gain to 1.8 percent, the first since the period ended Dec. 2. The euro slid 0.4 percent to 99.62 yen. The dollar was little changed at 77.19 yen.
Rabobank predicts the euro will weaken to $1.25 in three months as the region’s debt crisis continues, Foley said.
The benchmark Stoxx Europe 600 Index slipped 0.3 percent, and futures on the S&P 500 Index fell 0.2 percent.
Debt Crisis
The euro has tumbled in the past three months amid signs the region’s sovereign debt crisis, which started in Greece, was spreading to Italy and Spain. The single currency dropped 4.1 percent over the period, according to Bloomberg Correlation- Weighted Indexes, which track 10 developed-nation currencies. The dollar gained 2.8 percent, and the yen strengthened 0.5 percent, the indexes show.
European officials and Greece’s private bondholders agreed in October to implement a 50 percent cut in the face value of the nation’s debt by voluntarily exchanging outstanding bonds for new securities, with a goal of reducing the country’s borrowings to 120 percent of gross domestic product by 2020. An accord with bondholders is key to a second financing package for the heavily indebted country, which faces a 14.5 billion-euro bond payment on March 20.
The two sides have struggled to reach an accord on the coupon and maturity of the new bonds, which would determine losses for investors, raising the danger of a sovereign default.
“Even if they do reach a deal, the debt levels for Greece will still be unsustainable and further restructuring will be needed,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The situation in Europe still has a long way to go. The fundamentals still argue for a weaker euro. ”
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
