German firms increasingly worried about weak euro

Germany’s DIHK Chambers of Commerce said yesterday that while the weak euro would initially boost Europe’s largest economy by enabling exporters to offer their goods abroad for less, firms were increasingly concerned about the exchange rate.

“The strong exchange-rate fluctuations in recent months are making it difficult to develop long-term plans and increasing the cost of the hedging transactions they need to do,” the DIHK said.

Most firms in Germany have to import goods and these have become noticeably more expensive due to the weak euro, it said.

A DIHK survey earlier this year found that almost a fifth of German companies see the weak euro as a business risk, compared with 11% of firms in a poll in October.

While firms now pay around a third less for oil than they did six months ago, the weak euro exchange rate is counteracting some of those gains given that oil is priced in US dollars, the DIHK said.

“A weak exchange rate should not create the impression of greater competitiveness. A weak currency generally goes with a weaker economy,” it said.

“The devaluation of the euro is therefore also a sign that investors have more confidence in other countries’ dynamism, especially in the US.”

The DIHK also said there was a risk of competitive devaluation after several central banks around the world reduced their key interest rates and so stopped their currencies from appreciating more strongly. “That shows that competitive devaluation that seeks to boost your own export industry doesn’t achieve anything because other countries can always follow suit,” it said.

Reuters

German chambers of commerce fear weak euro could have negative effects

BERLIN (Reuters) – Germany’s DIHK Chambers of Commerce said on Thursday that while the weak euro would initially boost Europe’s largest economy by enabling exporters to offer their goods abroad for less, firms were increasingly concerned about the exchange rate.

“The strong exchange rate fluctuations in recent months are making it difficult to develop long-term plans and increasing the cost of the hedging transactions they need to do,” the DIHK said.

Most firms in Germany have to import goods and these have become noticeably more expensive due to the weak euro, the DIHK said.

A DIHK survey published in February found that almost a fifth of German companies see the weak euro as a business risk, compared with 11 percent of firms in a poll published in October, the DIHK said.

While firms now pay around a third less for oil than they did six months ago, the weak euro exchange rate is counteracting some of those gains given that oil is priced in U.S. dollars, the DIHK said.

“A weak exchange rate should not create the impression of greater competitiveness. A weak currency generally goes with a weaker economy,” the DIHK said.

“The devaluation of the euro is therefore also a sign that investors have more confidence in other countries’ dynamism, especially in the United States.”

The DIHK also said there was a risk of competitive devaluation after several central banks around the world reduced their key interest rates and so stopped their currencies from appreciating more strongly.

“That shows that competitive devaluation that seeks to boost your own export industry doesn’t achieve anything because other countries can always follow suit,” the DIHK said.

“On the contrary: in such competitions to get the weakest currency everybody loses out in the end.”

(Reporting by Michelle Martin; Editing by Susan Fenton)

US firms use cheap euros to access dollars, but window closing

By Jamie McGeever

LONDON, March 18 (Reuters) – The stark divergence between U.S. and euro zone monetary policy has made it more attractive than ever for U.S. companies to raise cash in euros and swap it back into dollars this year, but that window of opportunity could be closing.

The euro/dollar cross currency basis swap, effectively the cost of swapping one currency into the other without the exchange rate risk, recently showed the highest premium for dollars in more than two years.

This could deter U.S. firms from raising funds in euros and swapping them back into dollars, although the cost of raising dollar funds outright on the wider capital markets is even more prohibitive thanks to the widening gap between official U.S. and euro zone borrowing rates.

As long as it’s cheaper for U.S. firms to access dollar funds via the cross-currency basis markets, it will remain an attractive option, even if the rush to do so seen at the start of the year slows down.

“Valuation will make corporate issuance quite opportunistic as long as the cost of doing so is cheaper than credit spreads,” said Fabio Bassi, head of European interest rate derivatives strategy at JP Morgan in London.

Several U.S. multinationals have come across the Atlantic to raise billions of dollars in recent weeks, including Coca-Cola , AT&T and Mondelez.

There’s no clear-cut measure of how much it costs U.S. firms to raise funds in euro capital markets. That’s determined by each firm’s creditworthiness, risk perception in the eyes of investors and specific terms of the fund-raising in question.

U.S. firms have raised the most funds in euros year-to-date since the pre-crisis calm of 2007, even though the cost of swapping those euros back into dollars has risen to its highest in over two years.

They have issued 35.2 billion euros of bonds so far this year, according to Thomson Reuters data. That’s as much as the previous six years’ comparable totals combined, the highest since 2007 and the second highest since 2000.

They’re on track to raise a record amount this year of between 75 and 90 billion euros, according to Bank of America Merrill Lynch recent estimates. Potentially, that would be nearly double last year’s total of 51 billion euros.

These numbers show that proportionally, the share of U.S. investment grade debt issuance in euros this year will virtually double to as much as 30 percent of all issuance.

WIDER US-EURO ZONE SPREADS

Issuance tends to be greater in the first quarter anyway as companies budget and plan for the year ahead. A plentiful supply of global liquidity and a maturing euro zone market have also helped.

Not all of those euros will be swapped back into dollars, however. Some will be used to fund euro zone-based investment and spending, or for currency hedging purposes.

But the cost of doing just that on the cross-currency basis swap markets may still be relatively attractive. The benchmark three-month euro/dollar cross-currency basis swap rate hit -30 basis points recently, a level not seen since late 2012.

That negative number implies the premium an investor demands to swap his euro-interest rate exposure into dollar-denominated rate exposure. JP Morgan reckon the “break-even” level is around -38 basis points, although it could feasibly move out to as much as -50 basis points.

On Wednesday it had eased back to around -25 basis points.

Compare that to the spread of relative U.S. and euro zone government bond yields, as the European Central Bank launches its trillion-euro bond buying programme to tackle deflation and revive growth just as the Federal Reserve prepares the ground for its first interest rate since June 2006.

The six-month U.S. yield is 16 basis points and the euro zone equivalent is -21 basis points, giving a spread of 37 basis points.

The gap widens the further out the curve you go. The two-year U.S. yield is 0.67 percent and the euro zone equivalent is -0.21 percent, giving a spread of 88 basis points. The spread between equivalent 30-year yields recently hit 200 basis points, the widest on record.

“The pace of issuance is unlikely to continue, despite the busy pipeline,” said James Cunniffe Corporate on the bond syndicate desk at HSBC in London.

“But the rates are clearly attractive,” he said.

(Editing by Mark Heinrich)

U.S. firms use cheap euros to access dollars, but window closing

By Jamie McGeever

LONDON (Reuters) – The stark divergence between U.S. and euro zone monetary policy has made it more attractive than ever for U.S. companies to raise cash in euros and swap it back into dollars this year, but that window of opportunity could be closing.

The euro/dollar cross currency basis swap, effectively the cost of swapping one currency into the other without the exchange rate risk, recently showed the highest premium for dollars in more than two years.

This could deter U.S. firms from raising funds in euros and swapping them back into dollars, although the cost of raising dollar funds outright on the wider capital markets is even more prohibitive thanks to the widening gap between official U.S. and euro zone borrowing rates.

As long as it’s cheaper for U.S. firms to access dollar funds via the cross-currency basis markets, it will remain an attractive option, even if the rush to do so seen at the start of the year slows down.

“Valuation will make corporate issuance quite opportunistic as long as the cost of doing so is cheaper than credit spreads,” said Fabio Bassi, head of European interest rate derivatives strategy at JP Morgan in London.

Several U.S. multinationals have come across the Atlantic to raise billions of dollars in recent weeks, including Coca-Cola <CCE.N>, AT&T <T.N> and Mondelez <MDLZ.O>.

There’s no clear-cut measure of how much it costs U.S. firms to raise funds in euro capital markets. That’s determined by each firm’s creditworthiness, risk perception in the eyes of investors and specific terms of the fund-raising in question.

U.S. firms have raised the most funds in euros year-to-date since the pre-crisis calm of 2007, even though the cost of swapping those euros back into dollars has risen to its highest in over two years.

They have issued 35.2 billion euros of bonds so far this year, according to Thomson Reuters data. That’s as much as the previous six years’ comparable totals combined, the highest since 2007 and the second highest since 2000.

They’re on track to raise a record amount this year of between 75 and 90 billion euros, according to Bank of America Merrill Lynch recent estimates. Potentially, that would be nearly double last year’s total of 51 billion euros.

These numbers show that proportionally, the share of U.S. investment grade debt issuance in euros this year will virtually double to as much as 30 percent of all issuance.

WIDER US-EURO ZONE SPREADS

Issuance tends to be greater in the first quarter anyway as companies budget and plan for the year ahead. A plentiful supply of global liquidity and a maturing euro zone market have also helped.

Not all of those euros will be swapped back into dollars, however. Some will be used to fund euro zone-based investment and spending, or for currency hedging purposes.

But the cost of doing just that on the cross-currency basis swap markets may still be relatively attractive. The benchmark three-month euro/dollar cross-currency basis swap rate hit -30 basis points recently, a level not seen since late 2012.

That negative number implies the premium an investor demands to swap his euro-interest rate exposure into dollar-denominated rate exposure. JP Morgan reckon the “break-even” level is around -38 basis points, although it could feasibly move out to as much as -50 basis points.

On Wednesday it had eased back to around -25 basis points.

Compare that to the spread of relative U.S. and euro zone government bond yields, as the European Central Bank launches its trillion-euro bond buying program to tackle deflation and revive growth just as the Federal Reserve prepares the ground for its first interest rate since June 2006.

The six-month U.S. yield is 16 basis points and the euro zone equivalent is -21 basis points, giving a spread of 37 basis points.

The gap widens the further out the curve you go. The two-year U.S. yield is 0.67 percent and the euro zone equivalent is -0.21 percent, giving a spread of 88 basis points. The spread between equivalent 30-year yields recently hit 200 basis points, the widest on record.

“The pace of issuance is unlikely to continue, despite the busy pipeline,” said James Cunniffe Corporate on the bond syndicate desk at HSBC in London.     “But the rates are clearly attractive,” he said.

(Editing by Mark Heinrich)

Business activity lifted in February as central banks loosen up

By Jonathan Cable

LONDON (Reuters) – Global business activity picked up last month just as many central banks around the world loosen monetary policy further to try and drive up stubbornly low inflation and revive moribund economies.

Growth in China’s service industry accelerated and India’s expanded at an eight-month high while firms across the euro zone ramped up operations at the fastest rate in seven months, according to surveys published on Wednesday.

The survey results come days after the People’s Bank of China (PBOC) cut interest rates and mere hours after the Reserve Bank of India followed suit. The European Central Bank is about to embark on a trillion-euro stimulus program.

“Activity has begun to pick up a bit, some of the concerns about growth falling off a cliff towards the end of last year always seemed to us to be overdone,” said Andrew Kenningham at Capital Economics.

“The most likely factor is the fall in the oil price which is now beginning to feed through. Central bank action won’t do any harm.”

Oil prices, like the euro, have tumbled in recent months, helping drive Markit’s final February Composite Purchasing Managers’ Index (PMI) for the euro zone, seen as a good growth gauge, up to a seven-month high of 53.3.

Although weaker than a preliminary estimate of 53.5 it comfortably beat January’s 52.6 and achieved its 20th month above the 50 level that separates growth from contraction.

Markit said the surveys pointed to first quarter GDP growth of 0.3 percent, the same as in late 2014, with business activity expanding in all the bloc’s four biggest economies for the first time since April.

That matches the median forecast in a Reuters poll last month.

Eager German shoppers helped January’s euro zone retail sales grow at their fastest rate since May 2013, quicker than any of the economists polled by Reuters had expected.

But firms have been cutting prices for almost three years now to encourage demand, the PMI showed, and the ECB is still struggling to bring inflation — which was -0.3 percent in February — back to its near 2 percent target.

As part of that battle, and to stimulate growth, the central bank plans to flood markets with cash from this month.

Business expectations among services firms for the coming 12 months were at their highest since May 2011, suggesting they are optimistic the ECB’s plan will succeed — unlike nearly half of 83 economists polled by Reuters last week.

In contrast, Britain, which is outside the euro zone, may begin raising interest rates late this year, a Reuters poll found last week.

In a further sign its economy got off to a strong start in 2015, firms hired staff at the second-fastest rate on record, wages rose and new orders increased.

“Strong growth, rapid employment gains, optimistic firms, expectations of future rapid growth. It hardly stacks up to the Bank of England’s more cautious assessment of conditions in its February Inflation Report,” said Rob Wood at Berenberg.

The U.S. Federal Reserve is widely expected to begin tightening policy sooner, probably in June, although an Institute for Supply Management survey due later on Wednesday is expected to show a slight loss of momentum in services activity.

EASING ASIA

China’s HSBC/Markit Services PMI picked up to 52.0 last month from January’s 51.8 as new business increased at the quickest pace in three months.

“The solid rise in new orders suggests that activity growth may pick up in the months ahead, as firms continued to add to their payroll numbers amid a positive business outlook,” Markit economist Annabel Fiddes said.

Accounting for 48 percent of China’s $ 10 trillion economy last year, the services industry has weathered the growth downturn better than factories have, partly because it depends less on foreign demand.

Chinese economic growth slowed to 7.4 percent in 2014, the weakest in 24 years, and its central bank cut interest rates late on Saturday. It was the PBOC’s third major easing since late November, as regulators show signs of intensifying concern over lackluster data since the fourth quarter and growing deflationary pressures.

India’s central bank unexpectedly lowered its policy rate for the second time this year on Wednesday, backing a government that is pushing to revive economic growth as inflation cools.

Although markets had broadly expected the RBI to reduce rates again after a cut in January, few had expected a move just days after the government unveiled a budget that took a slower path to lowering the fiscal deficit.

(Additional reporting by Judy Hua and Pete Sweeney in Beijing; Editing by Catherine Evans)

GLOBAL ECONOMY-Business activity lifted in Feb as central banks loosen up

* Global business activity generally accelerating PMIs

* Surveys come just as many central banks loosening policy

* Euro zone retail sales beat all expectations in Reuters poll

By Jonathan Cable

LONDON, March 4 (Reuters) – Global business activity picked up last month just as many central banks around the world loosen monetary policy further to try and drive up stubbornly low inflation and revive moribund economies.

Growth in China’s service industry accelerated and India’s expanded at an eight-month high while firms across the euro zone ramped up operations at the fastest rate in seven months, according to surveys published on Wednesday.

The survey results come days after the People’s Bank of China (PBOC) cut interest rates and mere hours after the Reserve Bank of India followed suit. The European Central Bank is about to embark on a trillion-euro stimulus programme.

“Activity has begun to pick up a bit, some of the concerns about growth falling off a cliff towards the end of last year always seemed to us to be overdone,” said Andrew Kenningham at Capital Economics.

“The most likely factor is the fall in the oil price which is now beginning to feed through. Central bank action won’t do any harm.”

Oil prices, like the euro, have tumbled in recent months, helping drive Markit’s final February Composite Purchasing Managers’ Index (PMI) for the euro zone, seen as a good growth gauge, up to a seven-month high of 53.3.

Although weaker than a preliminary estimate of 53.5 it comfortably beat January’s 52.6 and achieved its 20th month above the 50 level that separates growth from contraction.

Markit said the surveys pointed to first quarter GDP growth of 0.3 percent, the same as in late 2014, with business activity expanding in all the bloc’s four biggest economies for the first time since April.

That matches the median forecast in a Reuters poll last month.

Eager German shoppers helped January’s euro zone retail sales grow at their fastest rate since May 2013, quicker than any of the economists polled by Reuters had expected.

But firms have been cutting prices for almost three years now to encourage demand, the PMI showed, and the ECB is still struggling to bring inflation — which was -0.3 percent in February — back to its near 2 percent target.

As part of that battle, and to stimulate growth, the central bank plans to flood markets with cash from this month.

Business expectations among services firms for the coming 12 months were at their highest since May 2011, suggesting they are optimistic the ECB’s plan will succeed — unlike nearly half of 83 economists polled by Reuters last week.

In contrast, Britain, which is outside the euro zone, may begin raising interest rates late this year, a Reuters poll found last week.

In a further sign its economy got off to a strong start in 2015, firms hired staff at the second-fastest rate on record, wages rose and new orders increased.

“Strong growth, rapid employment gains, optimistic firms, expectations of future rapid growth. It hardly stacks up to the Bank of England’s more cautious assessment of conditions in its February Inflation Report,” said Rob Wood at Berenberg.

The U.S. Federal Reserve is widely expected to begin tightening policy sooner, probably in June, although an Institute for Supply Management survey due later on Wednesday is expected to show a slight loss of momentum in services activity.

EASING ASIA

China’s HSBC/Markit Services PMI picked up to 52.0 last month from January’s 51.8 as new business increased at the quickest pace in three months.

“The solid rise in new orders suggests that activity growth may pick up in the months ahead, as firms continued to add to their payroll numbers amid a positive business outlook,” Markit economist Annabel Fiddes said.

Accounting for 48 percent of China’s $ 10 trillion economy last year, the services industry has weathered the growth downturn better than factories have, partly because it depends less on foreign demand.

Chinese economic growth slowed to 7.4 percent in 2014, the weakest in 24 years, and its central bank cut interest rates late on Saturday. It was the PBOC’s third major easing since late November, as regulators show signs of intensifying concern over lacklustre data since the fourth quarter and growing deflationary pressures.

India’s central bank unexpectedly lowered its policy rate for the second time this year on Wednesday, backing a government that is pushing to revive economic growth as inflation cools.

Although markets had broadly expected the RBI to reduce rates again after a cut in January, few had expected a move just days after the government unveiled a budget that took a slower path to lowering the fiscal deficit.

(Additional reporting by Judy Hua and Pete Sweeney in Beijing; Editing by Catherine Evans)

Euro zone private sector grows at fastest rate in six months in Jan – PMI

* PMIs point to Q1 growth of 0.3 pct – Markit (NasdaqGS: MRKT – news)

* Firms cut prices at steepest rate for nearly five years

* Service industry more optimistic about future

By Jonathan Cable

LONDON, Feb 4 (Reuters) – The euro zone private sector grew at its fastest pace in six months in January as firms slashed prices at the steepest rate in nearly five years, a business survey showed on Wednesday.

Data compiler Markit said the survey, carried out mostly before the European Central Bank announced a near-trillion euro quantitative easing programme to revive inflation and boost the economy, pointed to first-quarter growth of 0.3 percent.

That matches the median forecast in a Reuters poll last month and, if realised, would be faster than the 0.1 percent economists have pencilled in for the end of 2014.

Markit’s final January Composite Purchasing Managers’ Index (PMI), seen as a good indicator of growth, stood at 52.6, higher than a preliminary estimate of 52.2 and December’s 51.4.

“The euro zone enjoyed a positive start to 2015, as growth of economic activity accelerated. Among the big-four nations, output expanded in Germany, Italy and Spain, but the downturn in the French economy extended into its ninth month,” Markit said.

However, that growth came at a cost to margins. An index measuring output prices fell to 46.9 from December’s 48.1, its lowest reading since February 2010, suggesting firms were slashing prices to drum up trade.

Prices dropped a record-equalling 0.6 percent last month as commodity prices, Brent crude in particular, tumbled.

Price-cutting helped drive service industry activity up at the fastest rate in five months. The services sector PMI rose to 52.7 from December’s 51.6, ahead of the flash 52.3 estimate.

Confidence about the ECB’s QE programme and signs of growth in new orders accelerating helped lift a gauge of optimism among service firms by the biggest one-month margin in over five years, to 63.9 from 59.7.

* Detailed PMI data are only available under licence from Markit and customers need to apply to Markit for a licence.

To subscribe to the full data, click on the link below: http://www.markit.com/Contact-Us For further information, please phone Markit on +44 20 7260 2454 or email [email protected] (Editing by Hugh Lawson)

Euro zone private sector grows at fastest rate in six months in January – PMI

By Jonathan Cable

LONDON (Reuters) – The euro zone private sector grew at its fastest pace in six months in January as firms slashed prices at the steepest rate in nearly five years, a business survey showed on Wednesday.

Data compiler Markit said the survey, carried out mostly before the European Central Bank announced a near-trillion euro

quantitative easing programme to revive inflation and boost the economy, pointed to first-quarter growth of 0.3 percent.

That matches the median forecast in a Reuters poll last month and, if realised, would be faster than the 0.1 percent

economists have pencilled in for the end of 2014. [ECILT/EU]

Markit’s final January Composite Purchasing Managers’ Index (PMI), seen as a good indicator of growth, stood at 52.6, higher than a preliminary estimate of 52.2 and December’s 51.4.

“The euro zone enjoyed a positive start to 2015, as growth of economic activity accelerated. Among the big-four nations,

output expanded in Germany, Italy and Spain, but the downturn in the French economy extended into its ninth month,” Markit said.

However, that growth came at a cost to margins. An index measuring output prices fell to 46.9 from December’s 48.1, its

lowest reading since February 2010, suggesting firms were slashing prices to drum up trade.

Prices dropped a record-equalling 0.6 percent last month as commodity prices, Brent crude in particular, tumbled.

Price-cutting helped drive service industry activity up at the fastest rate in five months. The services sector PMI rose to 52.7 from December’s 51.6, ahead of the flash 52.3 estimate.

Confidence about the ECB’s QE programme and signs of growth in new orders accelerating helped lift a gauge of optimism among service firms by the biggest one-month margin in over five years, to 63.9 from 59.7.

(Editing by Hugh Lawson)

Euro zone starts 2015 better than thought as firms slash prices – PMIs

By Jonathan Cable

LONDON (Reuters) – The euro zone economy began 2015 in better shape than expected but firms were forced to slash prices, surveys showed on Friday, a day after the European Central Bank announced a money-printing plan in a bid to revive inflation.

Firms across the continent have been cutting prices at the fastest rate in nearly five years this month, in a trend that backs up the ECB’s decision on Thursday to embark on a programme of quantitative easing.

Markit’s Eurozone Composite Flash Purchasing Managers’ Index, based on surveys of thousands of companies and seen as a good growth indicator, bounced to a five-month high of 52.2 from December’s 51.4.

That beat the forecast in a Reuters poll for a more modest rise to 51.8 and marked its 19th month above the 50 level that separates growth from contraction.

“We are moving away from the lows towards the end of last year, but the actual rate of growth being signalled is still moderate,” said Rob Dobson, senior economist at survey compiler Markit.

Dobson said the PMIs pointed to first-quarter growth of 0.2 percent, slightly worse than the 0.3 percent predicted in a Reuters poll last week.

But the index for prices charged slumped to 46.9, its lowest since February 2010, and comes after official data showed consumer prices fell 0.2 percent in December, the first negative print since the depths of the financial crisis in 2009.

That discounting helped drive the services PMI up to 52.3 from 51.6, beating forecasts for 52.0, while the factory PMI rose as expected to 51.0 from 50.6.

The PMI for Germany’s private sector was less than a point above November’s 17-month low and the downturn deepened in France, the bloc’s second-biggest economy.

Also casting a shadow over February’s outlook, demand for manufactured goods barely increased while service firms were only able to build up the smallest of order backlogs.

“I wouldn’t expect there to be a significant improvement in February. We might see growth continue to improve slowly but we are unlikely to see a significant upturn,” Dobson said.

(Editing by Hugh Lawson)

FOREX-Dollar on firm footing as Greek vote pressures euro

* Euro close to more than 2-year lows, dollar steady vs yen

* Greek Prime Minister faces parliament vote, may bring elections

* U.S. data releases in focus in holiday-thinned market

By Lisa Twaronite

TOKYO, Dec 29 (Reuters) – The dollar began the final week of 2014 on firm footing on Monday, as the euro flirted with two-year lows while investors awaited a key vote in Greece later in the session.

Activity is likely to be thin this week ahead of the New Year’s holiday and many investors have already closed out their positions. The final U.S. data reports of the year will be in focus, including U.S. home prices on Tuesday and weekly jobless claims on Wednesday.

On Tuesday, the Conference Board will release its index on U.S. consumer confidence, which fell to 88.7 in November but was expected to show improvement.

“The index probably rebounded to close to the recovery-to-date high of 94.1 reached in October,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.

Solid data is likely to reinforce the view that the U.S. economy is improving enough for the Federal Reserve to consider ending its near-zero interest-rate policy in mid-2015, in contrast to the still-sluggish economies of the euro zone and Japan where central bankers are likely to continue monetary easing.

The dollar was up about 0.1 percent at 120.42 yen, within sight of its 7-1/2-year high of 121.86 set earlier this month.

Top Japanese companies think the yen will not decline much further next year and may even stage a sizeable rebound despite the Bank of Japan’s easing policies and Prime Minister Shinzo Abe’s stimulus, a Reuters survey released on Monday showed.

The survey of 67 firms, of which 47 responded between Dec. 15 and 22, predicted an average 2015 low for the yen of 125 to the dollar, and a high of 112.

The dollar was steady against the euro at $ 1.2178 after the European unit fell as low as $ 1.2168 earlier in the session, just a few ticks above last week’s 28-month low of $ 1.2165.

Greek Prime Minister Antonis Samaras faces a vote in parliament later on Monday that will decide whether the country goes to snap elections that could bring the leftwing Syriza party to power and derail an international bailout.

Voting is due to start at midday (1000 GMT), with the result likely around an hour later.

But underpinning the single currency, Jens Weidmann, a member of the European Central Bank’s Governing Council and the president of Germany’s Bundesbank, told a newspaper on Sunday that growth in Germany – Europe’s biggest economy – might be better than expected next year, and that the situation in Europe is not as bad as many people think.

Weidmann is the most vocal opponent of quantitative easing, which some economists believe is the ECB’s last resort to revive the euro zone economy.

(Editing by Edmund Klamann)