Greece’s referendum tomorrow means a short weekend for foreign exchange analysts and traders, some of whom will rush to their desks even before the official opening for currency trading at 5am Sydney time on Monday.
Voting is scheduled to close tomorrow at 7pm in Athens, or 2am on Monday in Sydney, and traders will be eager for results to start trickling out. The euro dropped almost 2 percent early on Monday after Greece called its referendum and a “No” vote this weekend could spur a similar opening slide.
UBS Group AG, the world’s fifth-biggest foreign exchange trader, will be gearing up for a busier opening to the Asian week than usual. In the past year, traders have had to weather votes on Scottish independence and the Swiss National Bank’s gold policy, as well the election in Greece that brought SYRIZA to power, all of which have had results announced outside of normal trading hours.
“The [foreign-exchange] markets will open on Monday at 3am Singapore time,” said Anthony Hall, regional head of foreign exchange, rates and credit in Asia-Pacific at UBS. “We will have much higher levels of staffing in at that time in order to handle the expected higher volumes and volatility as news of the referendum results comes out.”
As previous elections have shown, Greece’s vote has the potential to fuel exaggerated price swings as markets reopen.
“A ‘No’ vote would open up many more questions than answers — some of those relate to Greece, some relate to how Europe may function going forward,” Westpac Banking Corp Sydney-based global head of currency and commodity strategy Robert Rennie said.
Rennie plans to cut his weekend short as the fate of Greece — and the eurozone — hangs on the referendum’s outcome. He plans to start work at about 5am on Monday, two hours earlier than usual, to follow the outcome from tomorrow’s vote on the terms of Greece’s bailout.
He is bracing for volatility amid uncertainty over the Mediterranean country’s place in the eurozone.
The single currency was at US$1.1095 as of 8am in London, poised to decline for a second week, as a Bloomberg poll showed Greece is divided right down the middle heading into tomorrow’s referendum. One-month implied volatility retreated to 12.35 percent yesterday from a three-and-a-half-year high of 15.32 percent reached on Monday.
Greek Prime Minister Alexis Tsipras is campaigning for citizens to vote “No,” while the rest of the 19-nation bloc says a clear “Yes” could get the country back on the path to reform. Greek Minister of Finance Yanis Varoufakis vowed to quit if voters do not support the government, saying he would “rather cut my arm off” than sign a deal that fails to restructure the nation’s debt.
“Given the timing of the polls, I’m sure that traders, economists and strategists, including myself, will be in earlier on Monday morning,” Rennie said. “Markets are underestimating the potential impact of a negative outcome.”
A poll commissioned by Bloomberg News showed 43 percent intend to vote “No” to reject the austerity demanded by creditors in exchange for financial aid, while 42.5 percent back a “Yes” to accept the conditions, the survey of 1,042 people by the University of Macedonia Research Institute of Applied Social and Economic Studies showed. The margin of error was 3 percent.
For market participants like James Wood-Collins, the CEO of Windsor-based currency manager Record PLC, previous votes over the past year are helping to map out how to handle the latest political turmoil.
“It’s more a case of us planning ahead as we’re now doing, looking at, for example, positions we would be due to roll early next week and rescheduling them, or taking other steps to avoid having to trade in what could be a disrupted, volatile or illiquid market,” he said.
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