Euro softens as Greek deadline looms

The euro took something of a hit on Monday as Greek coalition parties dithered on approving the terms for a new bailout with a deadline just hours away.

Greece’s coalition members must tell the European Union by noon on Monday (1000 GMT) whether they accept the painful terms of a new bailout worth 130 billion euros in order to avoid a disorderly default, with euro zone ministers postponing a meeting planned for Monday due to the delay in Athens.

“There are so many hurdles before they reach a deal, with so many sticking points,» said Minori Uchida, senior currency analyst at Bank of Tokyo-Mitsubishi UFJ.

“The euro will likely test $1.30 again.”

The single currency shed 0.4 percent in early Asian trade to stand at $1.3105, having fallen as far as $1.3075 in thin early trade. Immediate support is seen at $1.3078, its 55-day moving average, ahead of $1.3023 – its February 1 trough.

Against the yen, the euro fetched 100.31 yen, down 0.5 percent from New York’s 100.81. On the Australian and New Zealand currencies, it hovered just above record lows set on Friday.

Still, the euro’s pullback is shallow by any measure. «The belief is that a deal will get over the line, more than likely at the last possible moment. That’s why we’re seeing some renewed buying from the lows,» said David Scutt, a trader at Arab Bank in Sydney.

Worries about Greece somewhat overshadowed Friday’s confidence-boosting US jobs data, which showed the world’s biggest economy created jobs at the fastest pace in nine months in January. That took the unemployment rate to a three-year low of 8.3 percent.

The US employment report sent Treasury yields sharply higher and helped lift the dollar against the yen. It bought 76.55 yen, having rallied some 0.7 percent to 76.74 on Friday.

But Junya Tanase, currency strategist at JPMorgan Chase in Tokyo, said the dollar will remain under pressure again the Japanese yen despite its initial reaction to the US job data.

“When you look at the historical correlation between the jobs data and the dollar/yen, you can see that positive surprises in the data tend to lead to a rise in the dollar/yen on the day of announcement. However, the correlation dies within a week. Data surprises have no correlation with the dollar/yen one-week after the data,» he said.

Against a basket of major currencies, the greenback popped back above 79.000, with the euro struggling a bit this morning. But it stayed near a two-month trough of 78.623 plumbed on Feb 1.

The Australian dollar slipped from a six-month high hit on Friday after surprisingly soft Australian retail sales data kept alive expectations of a rate cut by the Australian central bank on Tuesday.

The Australian dollar fell 0.4 percent to $ 1.0725, slipping from a six-month high of $1.0794 hit on Friday.

Most analysts also expect the RBA to cut rates by 25 basis points to 4.00 percent.

“Although the global economic outlook improved in past two months, Australian employment indicators, Australian commodity prices and inflation all declined in this period,» Barclays Capital analysts said in a report.

“Consequently, we believe the RBA will cut 25bp at the February meeting, given that once again ‘the inflation outlook afforded scope for a modest reduction in the cash rate’.”

Traders said a rate cut is well priced in and should not derail the Aussie’s uptrend against the US dollar, given the Aussie still enjoys a hefty yield advantage over most other major currencies. [Reuters]