The euro rebounded from an 11-year low as investors assessed the election victory in Greece of the anti-austerity Syriza party. European stocks erased earlier losses, while Russia’s ruble weakened.
The 19-nation euro strengthened 0.4 percent to US$1.1252 by 9:49am in London. The Stoxx Europe 600 Index, which closed at a seven-year high on Friday last week, advanced 0.2 percent, while Standard & Poor’s 500 Index futures dropped 0.4 percent. Greece’s bonds fell.
The ruble tumbled 2.2 percent as fighting in Ukraine spread.
Photo: Reuters
Greek prime minister-elect Alexis Tsipras prepared to form a government after coming within two seats of an absolute majority with most votes counted.
“Syriza’s win won’t be as bad for markets now as it could have been a few months ago,” said Alessandro Bee, a strategist at Bank J Safra Sarasin AG in Zurich. “Tsipras is less aggressive and willing to negotiate. The result will affect sentiment on Greece, but in a broader European context it’s just a blip. Markets are still in a risk-on mode and any news is dwarfed by the ECB stimulus program.”
Tsipras, 40, has pledged to keep the nation within the single currency area as he negotiates a writedown of Greek debt and eases budget constraints that were imposed in return for aid after the country’s economic collapse.
The current round of funding expires on Feb. 28 and talks with the so-called troika — the IMF, the European Commission and the ECB — for its renewal have stalled since September last year amid demands for further belt tightening.
Germany’s Ministry of Finance said in a statement that Minister of Finance Wolfgang Schaeuble’s position was unchanged after the election result and “the agreements reached with Greece remain valid.”
Finance ministers from the euro area were due to discuss Greece and its bailout in Brussels later yesterday.
The euro retreated 7.4 percent versus the dollar this year through Friday last week, the biggest decline among 16 major currencies tracked by Bloomberg.
The euro’s slide is putting pressure on China’s yuan, which yesterday rose through 7 per euro for the first time since 2001.
The yuan’s two-day drop of as much as 0.8 percent pushed it to a record 1.89 percent discount to the central bank’s reference rate. It sank as low as 6.2569 per US dollar as the People’s Bank of China cut its daily fixing by 0.07 percent to 6.1384 a dollar, the lowest since Dec. 4 last year. The spot rate rate is allowed to diverge a maximum 2 percent from the fixing.
Russia’s currency slid to 65.7490 per dollar and 2.5 percent to 73.911 to the euro.
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