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Foreign Exchange

Euro rises on Greek hopes as rating concern hampers yen

The euro rose against the dollar and the yen today (Tuesday) amid speculation Greece may avert a restructuring of its debt after European officials said a new aid package would be agreed by the end of next month.

The yen declined after Moody’s Investors Service indicated a Japan sovereign debt downgrade was likely because it had seen no progress on a political consensus over fiscal policy. Moody’s placed Japan’s Aa2 local and foreign currency ratings on review for downgrade.

The euro rose to a three-week high against the dollar, rallying from $1.4280 in early trade in Asia to as high as $1.4410. The euro also rose against the yen to 117.26 from 115.60, while the yen declined to 81.51 against the dollar from 80.75.

“We have seen stronger flows with the US and Europe back and the euro has been the best performer,” said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong. “It seems like there will be a short-term fix for Greece.”

European Union leaders have ruled out a total restructuring of Greece’s debt, according to Luxembourg prime minister Jean-Claude Juncker, who leads the group of euro-area finance ministers. Inspectors from the EU, the International Monetary Fund and the European Central Bank are set to wrap up a review of Greece’s progress in meeting the terms of last year’s €110 billion ($158 billion) bailout shortly.

The US economy was in the spotlight after weak manufacturing, housing and consumer spending reports in recent days raised concerns over economic growth in the world’s largest economy, after a disappointing first quarter.

“US-based money managers are sending money overseas and this is hurting the dollar,” said Geoff Yu, a strategist at UBS in London, in a note. “Investors are still willing to bet that risk markets (such as the euro) will find support.”

Elsewhere, New Zealand’s dollar hit a record of 82.64 US cents after a survey by ANZ National Bank showed a rising number of companies expect sales and profits will climb over the next 12 months.

Over the next few days investors will have GDP reports for Australia, Canada and Switzerland, as well as US jobs data and euro zone purchasing-manager indexes to digest for clues on growth.

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