BLBG:Euro Touches Three-Week High After Debt Deal for Greece
The euro touched a three-week high against the dollar after finance ministers from Europe’s 17- nation currency bloc reached agreement on Greece’s debt burden and its funding gap.
The shared currency gained versus most of its peers after euro-area finance chiefs and the International Monetary Fund agreed to cut Greece’s interest rates and gave it more time to pay back rescue loans. The yen fell as Japanese opposition leader Shinzo Abe reiterated his call for a different scale of monetary easing. The South Korean won was within 0.4 percent of a 14-month high after the nation tightened limits on the amount of currency forward positions banks are allowed to hold.
“The Greek deal is broadly positive for the euro,” said Gavin Friend, a currency strategist at National Australia Bank Ltd. in London. “The key to this is a substantial reduction in financing risks in the short term and therefore a lower Greek default risk. The euro is not going to shoot the lights out, but the risks are that we push a little higher still.”
The euro climbed to $1.3009, the strongest since Oct. 31, before trading little changed at $1.2979 as of 9:22 a.m. London time. It gained 0.2 percent to 106.71 yen. The Japanese currency weakened 0.2 percent to 82.22 per dollar after earlier appreciating as much as 0.3 percent to 81.86.
Greek Agreement
Euro-area ministers started their meeting soon after noon in Brussels yesterday, within a week of an all-night gathering that failed to yield agreement and days after a European Union summit broke up without a proposed seven-year budget for the 27- member bloc.
Greek Finance Minister Yannis Stournaras said the decision “keeps Greece in the euro.” IMF Managing Director Christine Lagarde said the nation will get an extra 15 years to repay loans.
“The agreement on Greece has been well received by markets,” said Daisuke Karakama, a market economist in Tokyo at Mizuho Corporate Bank Ltd. “The momentum in the euro’s rebound on the back of positive news out of Europe seems subdued, which suggests that the market is still quite cautious.”
The euro has fallen 2.2 percent this year, the third-worst performer among the 10 developed-market currencies after the yen, according to Bloomberg Correlation-Weighted Indexes. The yen has weakened 9.2 percent and the dollar has lost 2.3 percent.
Gains Pared
The euro pared its advance against the dollar after Federal Reserve Bank of Dallas President Richard W. Fisher said accommodative policies can’t be left in place forever and limits should be set on U.S. quantitative easing, boosting demand for the U.S. currency.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, slid as the U.S. Congress returns this week to discuss the so-called fiscal cliff of spending cuts and tax increases set to take effect in January. The gauge fell 0.1 percent to 80.203. Lawmakers are trying to avert the fiscal cliff to prevent a short-term shock to the economy and reach an agreement on long-term deficit reduction.
“Anything that’s seen as positive for risk and U.S. equities is still, more likely than not, negative for the U.S. dollar,” said Ray Attrill, Sydney-based global co-head of currency strategy at National Australia Bank. “Progress in fiscal-cliff negotiations would be negative for the dollar.”
The greenback may fall to 81.49 yen, the 23.6 percent retracement of the currency’s climb from the Sept. 13 low of 77.13 to the Nov. 22 high of 82.84 on the Fibonacci chart, according to Callum Henderson, Singapore-based global head of currency research at Standard Chartered Plc. The U.S. currency last reached that level on Nov. 20.
Korean Won
South Korean authorities will cap transactions at branches of overseas lenders at 150 percent of equity, compared with 200 percent currently, according to a statement today from the Finance Ministry, Bank of Korea and the Financial Services Commission. The ceiling for domestic banks will be cut to 30 percent from 40 percent. The changes will take effect on Dec. 1, with a one-month grace period to Jan. 1.
The won was little changed against the dollar at 1,084.08 having strengthened 5.7 percent since the end of June, the best performance among the 11 most-traded Asian currencies.
Japanese Prime Minister Yoshihiko Noda, whose ruling Democratic Party of Japan trails in opinion polls, and Abe will face each other in a debate to be broadcast over the internet on Nov. 29. Abe today called for inflation target discussions with the Bank of Japan. (8301) He said bold monetary easing will correct the yen’s strength. The nation will hold elections on Dec. 16 for the lower house of parliament.
Abe, a former prime minister and the head of the Liberal Democratic Party, has called for “unlimited” provisions of cash by the central bank until inflation reaches as high as 3 percent.
To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
