Greece relief means buying dollars as euro, aussie, loonie fall


The euro dropped to a two-month low against the dollar after German Chancellor Angela Merkel signaled Greece may get limited debt relief, allowing traders to shift focus back to diverging monetary policy.

The single currency extended losses from last week when it tumbled 3 percent, the biggest weekly loss since May. Hedge funds and other large speculators boosted bets to the most in a month that the euro will weaken, while increasing wagers the dollar will advance, futures data show. Australia’s dollar slumped to a six-year low, while New Zealand’s gained.

“The removal of the so-called Grexit risk from the immediate horizon means that one of the risks to the Fed moving to start tightening policy this year has been eliminated,” said Ray Attrill, global co-head of currency strategy at National Australia Bank Ltd. in Sydney. “It’s a relative monetary policy story.”

The euro was little changed at $1.0828 as of 6:45 a.m. in London after sliding to $1.0821, the lowest level since May 27. The common currency was at 134.44 yen versus 134.38 yen last week. The dollar gained 0.1 percent to 124.17 yen.

Japan’s financial markets are closed Monday for a holiday.

Merkel told German broadcaster ARD that she’s prepared to discuss the matter of Greek debt relief once the nation successfully completes the first round of a new bailout. She ruled out any haircut on Greek debt.

Euro’s Decline

The euro has tumbled 4.5 percent this year, the second- worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar jumped 8 percent and the yen rose 3.8 percent.

The dollar advanced last week after Federal Reserve Chair Janet Yellen indicated policy makers would look to raise interest rates by year-end. The European Central Bank maintained its program of quantitative easing when it met July 16.

There’s a 33 percent chance the Fed will boost its benchmark rate at its Sept. 16-17 meeting, and 71 percent odds by December, according to data compiled by Bloomberg based on futures. The central bank has kept its fed funds target in a range between zero and 0.25 percent since December 2008.

The Bloomberg Dollar Spot Index, which tracks the currency versus 10 major peers, climbed 0.1 percent to 1,209.20 after rising to 1,210.09, the highest since April 13. It has gained for four straight weeks, the longest winning streak since the period through March 13.

Aussie Weakens

Australia’s dollar dropped for a second day as commodities such as oil and gold declined.

“Very few currencies will be able to withstand the U.S. dollar onslaught,” Kay Van-Petersen, a strategist at Saxo Capital Markets in Singapore, wrote in an e-mail. The biggest losers will be the euro, yen and commodity-linked currencies, especially the Canadian dollar, he said

The Aussie fell 0.2 percent to 73.60 U.S. cents after declining to 73.28, the least since May 2009. Canada’s weakened 0.1 percent to C$1.2982 per U.S. dollar.

The Canadian dollar, known as the loonie, slumped beyond C$1.30 last week for the first time since March 2009 after the central bank lowered its interest-rate target to 0.5 percent, the second reduction this year.

New Zealand’s dollar gained for a second day as Prime Minister John Key said the economy was growing at a respectable rate and the currency had fallen faster than anticipated.

The kiwi jumped 0.6 percent to 65.66 U.S. cents. It has still tumbled 16 percent this year.

National Australia Bank predicts the currency will depreciate to 60 cents in March, after earlier forecasting it would weaken to 64 cents, Attrill said. The company expects the central bank to cut interest rates in July, September and October, he said.