Euro strengthens as Greece works to draft deal with creditors
The euro rose against most of its major peers on speculation that Greece was moving closer to reaching a deal with its creditors, alleviating concern the indebted nation will exit the shared currency.
The 19-nation currency erased losses against the dollar after a Greek government official said the nation started drafting a staff-level agreement on funding with representatives of its international creditors. The accord will envisage low primary budget surpluses, a sales-tax overhaul and a pension- system reform, according to an e-mail to reporters.
“The euro’s finding a little support on some headlines that a potential draft is in the pipeline,” Mike Moran, a senior strategist in New York at Standard Chartered Plc, said by phone. “This would be a first step toward an official deal. It’s somewhat still in its early days.”
The euro rose 0.1 percent to $1.0882 as of 12:24 p.m. in New York, after dropping as much as 0.5 percent earlier. It surged 0.7 percent to 134.76 yen.
While the European Commission said the two sides haven’t reached an agreement, optimism that Greece will clinch a deal has provided some relief for the euro, which has dropped 5 percent in the past two weeks from its three-month high. The currency is on its way to re-establish the long-term downtrend as it approaches $1.0458, the weakest level since 2002.
A growing set of improving economic data from the U.S. also breathes new life into the dollar’s rally, putting downward pressure on the euro. April economic data from consumer prices to durable goods orders improved, suggesting the first-quarter economic slowdown was temporary. Federal Reserve Chair Janet Yellen said last week she expects to raise interest rates this year.
“A number of factors are combining to weigh on EUR/USD, the bias is for these factors to play out further,” Peter Dragicevich, a strategist at Commonwealth Bank of Australia in London, wrote in a research note. “We think the Fed will raise rates in December 2015, but the risks are tilted to an earlier start. A bring forward in market expectations should be USD supportive.”
[Bloomberg]
