Comments
The euro bounced back from two-year lows against a slightly weaker dollar on Monday, with Greece’s presidential election and a batch of US data on Tuesday the chief risks to a calmer holiday mood.
The Australian dollar, up 0.3 per cent, was the chief beneficiary of a recovery in oil prices that has seen Brent crude move almost 7 per cent higher from last week’s more than five-year lows.
The outlook into 2015 for the euro looks weak, with Luc Coene the latest European Central Bank policymaker to point the way towards outright buying of government bonds to stimulate a still moribund euro zone economy.
Crossing that Rubicon — effectively funding government deficits with newly-printed money — is expected to test the bottom end of a range in which the euro has held for more than a decade against the dollar.
“It’s going to be interesting this week whether we can push a bit lower,’’ said Jane Foley, a strategist with Rabobank in London.
“We’re at levels where from a long-term valuation perspective the euro is weak but here we have ECB officials saying they will ease further and the Fed headed the other way.’’
The euro bottomed out against the dollar at $1.22205 on both Friday and early on Monday and Foley said that reflected strong technical resistance to it going below $1.22. The common currency has fallen about 11 per cent so far this year. It last traded up 0.3 per cent on the day at $1.2254.
Dealers at other banks said there was interest to buy euros around $1.2220-30.
There is no major data due in Europe this week, but US numbers on Tuesday will fuel the debate over the divergent policy paths being taken on either side of the Atlantic.
Greek Prime Minister Antonis Samaras, whose party is trailing behind the anti-bailout Syriza Party in opinion polls, may struggle to avoid a snap election in the two remaining rounds of voting for his candidate for president, planned on December 23 and December 29.
The concern for markets is that that could lead to a renewed threat of Greece defaulting or even departing from the euro.
“The markets may be quiet for now due to holidays but the Greek vote on December 29 could really shake things up,’’ said a trader at a Japanese bank.
Sterling, also a sufferer against the dollar since July, was up 0.1 per cent at $1.5630, but 0.2 per cent weaker at 78.44 pence per euro.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.