Euro swings low ahead of important Greek vote

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Euro swings low ahead of important Greek vote

The euro on Friday traded 0.3 percent from the lowest level in two months before lawmakers in Greece vote on next year’s budget amid concern the nation may fail to meet bailout requirements.

The yen headed for its biggest weekly gain since July against the 17-nation euro after a European Union official said a decision on unlocking funds for Greece may not be made until late November, prompting investors to seek safer assets. Australia’s dollar maintained a two-day decline after the nation’s Reserve Bank cut its 2013 growth forecast and China reported on October inflation yesterday.

Reports on Greece “cast new doubts on an already troubled area,” said Hans Kunnen, chief economist at St. George Bank in Sydney. “The Greek economy is in a dire state, with or without aid, and that is making everybody continually nervous. The euro will stay under pressure.”

The euro has dropped 0.7 percent since Nov. 2. The yen fetched 101.35 per euro from 101.30, set for a 1.8 percent gain this week, the sharpest advance since the five days ended July 6.

Euro-area finance ministers may not make a decision on unlocking funds for Greece until late this month as they await a full report on the country’s compliance with the terms of its bailout, according to a EU official.

Finance chiefs won’t make the call to release 31.5 billion euros ($40.1 billion) of aid for Greece that has been frozen since June when they meet in Brussels on Monday, the official said yesterday, on condition of anonymity because the deliberations are private.

Greek Prime Minister Antonis Samaras on Thursday mustered the support of enough lawmakers to secure approval of a bill on pension, wage and benefit cuts needed for bailout funds to flow. The parliament will convene again on Sunday to vote on the 2013 budget.

Also weighing on the euro are signs that the region’s debt woes are weakening its core economies.

A report yesterday may show industrial production in France, Europe’s second-largest economy, probably fell 1 percent in September from August, according to the median estimate of economists in a Bloomberg News survey. In Germany, the region’s biggest economy, data this week suggested growth is grinding to a halt while exports, factory orders and industrial output all fell more than forecast in September.

European Central Bank President Mario Draghi said the economic outlook is worsening and the bank stands ready to activate its bond-purchase program if governments fulfill the necessary conditions.

“We are ready to undertake” outright monetary transactions, “which will help to avoid extreme scenarios,” Draghi said at a press conference in Frankfurt on Thursday. The comment was made after policy makers left the benchmark interest rate at a historic low of 0.75 percent. “The risks surrounding the economic outlook remain on the downside,” he said. The Australian dollar was little changed at $1.0399, following a 0.3 percent decline over the previous two days.

Bloomberg

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