By William L. Watts and Sarah Turner, MarketWatch
FRANKFURT (MarketWatch) — Political uncertainty in Europe continued to put modest pressure on the euro, while helping to send the Australian dollar toward parity versus its U.S. counterpart as investors shied away from risk-oriented assets.
Greece appeared likely to face another election as early as next month with the nation’s parties appearing unlikely to cobble together a coalition after splintered election results in Sunday’s parliamentary elections.
“Risk FX remained under pressure in morning European trade today as yields on Spanish debt rose above the 6% and Greece saw no progress on creating a workable majority government for its Parliament,” said Boris Schlossberg, director of currency research at GFT.
The euro changed hands at $1.2973, down from $1.3014 in North American trade late Tuesday, while holding support above the $1.2960 low set earlier this week.
Spanish government bonds saw renewed pressure Wednesday, pushing the 10-year yield back above the 6% threshold. Read Market Pulse on Spanish bond yields.
The Australian dollar, which reacts strongly to shifts in risk appetite, traded at $1.0061, down from $1.0125 in late North American trading Tuesday, when it touched a session low of $1.0087.
“The implications of events in both France, and more so Greece, are seeping through markets and have made themselves known within most asset classes. In FX, it’s created further pressure on the high-beta currencies, with AUD/USD nudging very close to parity in overnight trading. The Kiwi and Mexican peso are also notably softer,” said Simon Smith, chief economist at FxPro in London.
The New Zealand dollar fell 0.2% versus its U.S. counterpart to fetch 78.47 U.S. cents. The U.S. unit rose 0.7% versus the Mexican unit to fetch 13.447 pesos.
The Australian dollar hasn’t fallen below parity with the U.S. dollar since mid-December.
The concern in the currency markets is that Greece may “shoot itself in the foot” and run out of money by the end of June, said BNP Paribas currency strategist Robert Ryan.
“The implications for the global financial system are not positive,” he said. “People are looking for excuses to push lower against the backdrop of Greece.”
At the same time, the ICE dollar index, which measures the greenback against a basket of six other currencies, rose to 79.964, up from 79.719 in late trading Tuesday.
The move extended the dollar’s longest string of gains since 2008, as investors sought a haven amid worries both about Greece’s potential exit from the euro zone and the health of Spain’s banks.
The British pound traded at $1.6123, down from $1.6158 late Tuesday.
The dollar bought 79.61 Japanese yen, slipping from ÂĄ79.81 in late trading Tuesday.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
Sarah Turner is MarketWatch's bureau chief in Sydney.
