Euro erases gains as Greek optimism gives way to monetary policy
The euro erased an earlier advance against the dollar as analysts warned any gains will prove fleeting as the market’s focus increasingly switches away from Greece to global monetary policy.
“In the last days, we often saw a pick-up in euro-dollar around the time European markets open, but so far the euro wasn’t able to hold these gains in the afternoon,” said Esther Reichelt, a currency strategist at Commerzbank AG in Frankfurt.
The euro was little changed at $1.0836 as of 10:57 a.m. in London, after sliding to $1.0821, the lowest level since May 27. It gained 0.2 percent to 134.68 yen, while the dollar advanced 0.2 percent to 124.29 yen.
Europe’s single currency was still stronger versus all but two of its 16 most-traded peers as Greece confirmed it would make payments due to the European Central Bank and International Monetary Fund. Greek banks reopened Monday, three weeks after they were shuttered to prevent economic collapse.
The euro’s gains earlier Monday were “driven by the relief that Greece is indeed able to pay the ECB today,” Commerzbank’s Reichelt said.
Policy Focus
Last week, the euro dropped the most in about two months as investors focused on the probability of the Federal Reserve raising interest rates this year while the ECB continues to add currency depreciating stimulus.
There were other reasons to suppose any gains in the single currency may be short-lived. Hedge funds and other large speculators boosted bets on a weaker euro to the most in a month, while increasing wagers the dollar will advance, futures data show. Implied volatility in the euro-dollar rate rose for the first time in eight days.
Greece gave the order to repay 6.8 billion euros to creditors after last week’s tentative bailout deal, according to a Finance Ministry official, who asked not to be identified in line with government policy.
[Bloomberg]
