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FOREX-Euro drifts lower with focus on Greek debt talks

* Dollar touches one-month high vs yen

* U.S. yields rise as Fed rate hike view strengthens

* Euro slips, near 7-yr low vs pound before Greek debt meetings (Recasts, adds fresh quote, details)

By Anirban Nag

LONDON, Feb 11 (Reuters) – The euro eased on Wednesday ahead of a euro group finance ministers’ meeting that is set to discuss Greece, with failure to find common ground about the country’s debt burden set to keep investors edgy and price action choppy.

The dollar, meanwhile, hit a one-month high against the yen, bolstered by a rise in Treasury yields. Trade was thin, though, with Japanese markets closed for a public holiday.

In Europe, Greek Finance Minister Yanis Varoufakis attends his first meeting of euro zone finance ministers where he will spell out plans to drop his country’s bailout and end austerity.

He will seek a “bridge agreement” to buy time until June for a full settlement. The euro moved higher on Tuesday on optimism that a compromise is likely, which would be more acceptable to markets than Greece exiting the euro zone. Any suggestion of talks breaking down could see a sharp sell-off in the euro.

The euro edged down to $ 1.1310, and 0.2 percent lower against the pound at 74.095 pence, not far from a 7-year low of 74.06 struck in late January.

“Greece is centre-stage and the Greeks are likely to present a plan that has met with resistance. So there is a downside risk for the euro and any rallies into $ 1.1360 will be sold,” said Jeremy Stretch head of currency strategy at CIBC World Markets.

“Also, we have a bid on the dollar on increased Fed rhetoric about hawkish monetary policy.”

Richmond Fed President Jeffrey Lacker, an inflation hawk, said on Tuesday that a June hike was an “attractive option” while San Francisco Fed President John Williams said economic conditions are “getting closer” to the point where it made sense to think about starting to normalise policy.

The dollar rose 0.3 percent to 119.77 yen, its highest level in a month. Helping the dollar was a rise in the benchmark U.S. 10-year Treasury yield, which popped above 2 percent on Tuesday for the first time in a month on views the Fed might lift interest rates by mid-2015.

The dollar’s near-term moves against the yen are likely to be driven more by Fed rate rise expectations rather than safe-haven buying of the yen, said Jesper Bargmann, head of trading for Nordea Bank in Singapore.

“Having said that, I also think there is a risk that the market may have gone in a little bit early,” he said, adding that a near-term focus would be whether the dollar manages to finish the week above 119.10 yen.

(Additional reporting by Masayuki Kitano; Editing by Toby Chopra)

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