Sun, Jun 17, 2012 - Page 10 News List

Euro rises versus dollar prior to Greece election

Bloomberg

The euro strengthened against the US dollar for a second week as investors pulled back on record bets against the currency before the Greek election today that may determine whether the nation remains in the bloc.

The 17-nation currency rallied amid speculation central banks might provide aid to financial markets after Spain last week became the fourth euro member to seek a rescue. The yen strengthened against the US dollar after the Bank of Japan refrained from expanding monetary stimulus that debases the currency. The greenback fell versus major peers as weaker US growth added to the case for further monetary stimulus from the US Federal Reserve at its policy meeting om Tuesday and Wednesday.

“Most investors think the outcome is likely going to be a coin toss,” said Joe Manimbo, a market analyst in Washington at Travelex Global Business Payments, a currency-exchange network, referring to the Greek elections. “That leaves open the prospect for a positive outcome. Consequently, we’ve seen investors really scale back on some of those deeply bearish bets against the single currency.”

The euro rose 1 percent to US$1.2638 this week in New York trading, after gaining 0.7 percent last week. The shared currency was little changed at ¥99.49. The US dollar lost 0.8 percent to ¥78.73, reaching ¥78.61, the lowest level on Friday since June 6.

Hedge funds and other large speculators pared their bets on a drop in the euro against the US dollar from a record high, Commodity Futures Trading Commission data showed yesterday. Futures traders decreased net euro short contracts to 195,187 in the week ended June 12, the figures showed on Friday. They reached a high of 214,418 the week ended June 5.

The euro has appreciated 2.2 percent against the US dollar this month, after falling 6.6 percent last month. The median year- end estimate for the euro is US$1.25, according to more than 50 economists and strategists surveyed by Bloomberg.

Pound Gains

The pound rose 0.2 percent to £0.8074 per euro and strengthened 1.2 percent to US$1.5655. It gained against most of its 16 major peers this week.

However, the pound is the worst performer in the past month among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. It slid 2.5 percent, while the US currency fell 0.2 percent and the euro dropped 1 percent during the period.

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