Arab Today, arab today euro clings to tiny gains extending recovery run
Last Updated : GMT 05:31:42
Arab Today, arab today
Arab Today, arab today

Euro clings to tiny gains, extending recovery run

Arab Today, arab today

Arab Today, arab today Euro clings to tiny gains, extending recovery run

Tokyo - Arabstoday

The euro Tuesday clung to small gains as market players bet the Eurozone will cobble together measures to prevent Greece from defaulting on its debt, though its advance could stall ahead of a confidence vote on the government in the Greek parliament. The euro was lifted by short-covering after Klaus Regling, chief of the European Financial Stability Facility, said on Monday that the bailout fund\'s guarantees would be raised to €780 billion (Dh4 trillion) from the €440 billion that has just been rubber stamped by ministers. \"In the great scheme of things, market players are starting to believe that Euro-zone policymakers, especially German policymakers, will try to avoid a hard landing for Greece,\" said Makoto Noji, a strategist at SMBC Nikko Securities. Stop-loss orders The euro was up 0.3 per cent at $1.4348 , having risen as high as $1.4385 as short-term players tried to trigger stop-loss orders scattered around $1.4350, and extending its recovery from a three-week low of $1.4073 hit last Thursday. \"It\'s all driven by short-term players. No one is buying the euro to hold it for a long time,\" said Tsutomu Soma, manager of foreign bonds at Okasan Securities. The euro pared gains after Fitch Ratings said it would regard both a Greek sovereign debt swap and a rollover of maturities, even a voluntary one, as a default. But the impact was partly mitigated as the ratings agency also said it will review its rating on the United States if Congress does not agree to raise the country\'s debt ceiling by August 2, when the Treasury has warned it may not be able to borrow more. \"Risk takers may come back to the euro, considering that the Federal Reserve is nowhere near an exit from its easy policy, in contrast to the ECB, which has indicated that it will raise rates despite debt problems,\" SMBC Nikko\'s Noji added. The US central bank has a two-day policy meeting ending today, its first since US economic data started to take on a decisively weaker tone around a month ago. As the euro recovered, the dollar index lapsed to 74.837, from a high of 75.472. The euro\'s higher interest rates have been the main driver of the euro\'s strength this year. \"The basic stance of many market players is that they go long on the euro to earn higher interest rates and get away from the euro just when the risk from the debt problems seems large enough,\" said Seiya Nakajima, chief economist at Itochu Corp. Wild card One wild card for the euro at the moment was the confidence vote in Greece, which was due yesterday. \"The market thinks the confidence motion will be passed. Still, should it fail, the euro will be dumped massively, so it is hard to take large risks now,\" said a trader at a Japanese brokerage. But some market players are already going long on the euro on hopes that the motion will be passed, traders said. If it is passed, another hurdle will be the Greek parliament\'s vote on new austerity measures on June 28. Eurozone finance ministers gave Greece two weeks from Monday to approve further spending cuts and tax rises in exchange for more emergency loans, piling pressure on Athens to get its ragged finances in order. \"It\'s really going to be a chop-fest for the next week until we get this austerity vote,\" said a trader at a US bank in Hong Kong. \"Maybe the best position is no position at all.\" Rescue package The euro\'s recovery started after leaders of Germany and France, long at odds over how to involve private holders of Greek bonds in a new rescue package for Athens, agreed last week on a mild solution favoured by Paris and the European Central Bank, thereby reducing investor fears of an immediate default by Greece. The euro\'s next resistance is seen at its 55-day moving average of $1.4413 and its June 15 high of $1.4451. From Gulfnews.

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