Tags: euro | currency | dollar | greece

Euro Drops to 11-Year Low on Greek Vote After QE

Friday, 23 January 2015 10:33 AM

The euro fell to the lowest in more than 11 years as polls showing an anti-austerity party will win Greek elections exacerbated the currency’s drop after the European Central Bank widened its stimulus program.

The shared currency headed for a sixth weekly decline before the Sunday vote that may oust Greek Prime Minister Antonis Samaras. The ECB said Jan. 22 it would buy $60 billion euros ($68 billion) a month of debt. The dollar headed for its highest close on record before the Federal Reserve meets next week. The yen rose as the Bank of Japan governor signaled the central bank will look at fresh stimulus options. Australia’s dollar declined to the lowest since 2009.

“Greek elections do add some uncertainty and weigh on the currency somewhat, but the more relevant and important thing is the economic and monetary policy trends in the euro zone,” Eric Viloria, a strategist at Wells Fargo & Co. in New York, said in a phone interview. “They’re likely to maintain an easy policy stance for quite some time.”

The euro fell 1.1 percent to $1.1247 at 9:48 a.m. New York time after touching $1.1115, the weakest since September 2003. It fell 2.1 percent yesterday and is set for a 2.8 percent weekly loss. The euro declined 1.7 percent to 132.44 yen, poised for a fourth weekly decline. Japan’s currency rose 0.6 percent to 117.77.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, rose 0.3 percent to 1,159.52, having climbed 1.8 percent this week. It closed at 1,156.11 on Thursday, the highest since the index started in 2004.

Winners, Losers

The yen led advances versus the dollar and rose against all of its 31 major peers as BOJ Governor Haruhiko Kuroda suggested the central bank may broaden its approach to stimulus.

“We can make adjustment to our monetary policy,” Kuroda said in an interview with Bloomberg Television in Davos, Switzerland. He declined to specify the options available.

Russia’s ruble is poised for the biggest gains of the week, adding 1.8 percent, as investors channel money back into higher-yielding assets.

The Australian dollar slid, with traders seeing a 47 percent chance the central bank will cut rates at this year’s first policy meeting on Feb. 3, up from 25 percent odds on Jan. 16, according to overnight interest-rate swaps.

The Aussie fell 1.3 percent to 79.21 U.S. cents, after earlier dropping to 78.81 cents, the lowest since July 2009.

The currency is poised to decline 3.7 percent this week, exceeded only by the New Zealand dollar’s 4.2 percent slide. The kiwi fell 0.5 percent to 74.69 U.S. cents today and touched 74.32, the least since November 2011.

Fed Meets

Bloomberg’s gauge of the dollar climbed a sixth day, the longest streak since September, on prospects the U.S. economy will outperform those of Europe and Japan as the Fed moves to become the first major central bank to raise interest rates this year. It sets policy Jan. 28.

The euro slid against all but two of its 16 major peers a day after ECB President Mario Draghi told reporters in Frankfurt that the central bank will start buying from March until at least September 2016. The QE will compromise 45 billion euros in investment-grade sovereign bonds, 5 billion euros in the debt of euro-area public agencies, and 10 billion euros under existing programs to buy asset-backed securities and covered bonds, a euro-area official said.

“Draghi has managed to squeeze out a really big reaction,” said Jane Foley, a senior strategist at Rabobank International in London, “Another interesting part of this is how other central banks are going to react.”

Greek Vote

Greek voters go to the polls on Jan. 25 in a general election that will decide whether Europe’s most-indebted country sticks to an austerity program that ensures its financial lifeline from creditors such as Germany.

The opposition Syriza group, which has vowed to abandon the budget constraints that underpin the support while keeping Greece in the currency union, is projected by polls to gain about 32 percent of the vote on Sunday compared with about 27 percent for New Democracy.

“The Greek election provides another reason to sell euro, in case the ECB decision was not enough,” said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney.

The euro dropped 0.6 percent in the past week among 10 developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The dollar was the biggest gainer, adding 2.6 percent, and the yen rose 2.4 percent.

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The euro fell to the lowest in more than 11 years as polls showing an anti-austerity party will win Greek elections exacerbated the currency's drop after the European Central Bank widened its stimulus program.
euro, currency, dollar, greece
Friday, 23 January 2015 10:33 AM
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