Tuesday, June 21, 2011

Greece Confidence Vote

The dollar suffered slight losses vs. the euro in Tuesday dealings, the European currency bolstered by a further round of short covering that appeared inspired by gains in U.S. stocks and by optimism over the outcome of a confidence vote due in Greece Tuesday night.
Euro-dollar was changing hands at $1.4405 in afternoon dealings Tuesday, the euro holding in the upper reaches of the day's $1.4348/1.4422 U.S. hours range after beginning the session near the lows.
Dollar-yen meantime was changing hands at Y80.14 in afternoon dealings, the dollar here locked in a tight Y80.02/80.22 range during the U.S. session, the dollar here locked into all-too-familiar territory just above Y80.00.
Afternoon dealings were at a slow pace Tuesday but the euro was taking its cue from an especially buoyant tone in U.S. stocks where the Dow Jones Industrial Average was holding gains of about 105 points or nearly 1% while the Nasdaq Composite was up about 2%.
Against that backdrop, modestly refreshed risk-appetites kept the euro bolstered near its high of the day seen around midday when a raft of stop-loss euro buy orders were tripped shortly after the European close.
That buying, triggered above $1.4405, saw the euro nudge quickly to $1.4422 before the prospect of fresh selling at $1.4430 damped further enthusiasm for the euro.
Earlier in the day, the euro had drifted slowly higher as traders began the countdown to a vote in the Greek parliament that is intended to send a show of support to embattled prime minister George Papandreou, with the presumption being that a positive outcome will signal that the prime minister has sufficient backing to pursue a fresh austerity budget that requires its own vote next week.
While a vote supporting Papandreou is but the next step in a laborious process, it does not mean that passage of the austerity budget is assured.
In the meantime, EU officials and the International Monetary Fund have made passage of that budget a condition for the disbursement of the next tranche of funds to Greece from a loan program agreed in 2010.
Without those funds, about E12 billion, Greece will likely default on debt maturing in July, analysts say.
Until there is more certainty over the new Greek budget, the euro could remain fragile, traders say.
Adding a further complication to the euro's outlook, the Federal Open Market Committee is due to render its decision on interest rates Wednesday after it concludes a two-day meeting.
While no change is expected in U.S. monetary policy, Federal Reserve chairman Ben Bernanke will hold a press conference after the event, explaining the Fed's decision.
Traders will parse those remarks for insight into the Fed's stance after a recent bout of soft U.S. economic data, seeking clues and insight into the likelihood of further Fed assistance to a still struggling economy.
The Fed's rate decision will be announced at 12:30 EDT Wednesday with the chairman's press conference is set to begin at 2:15 EDT.
Dollar-yen meantime remained locked in a tight range above Y80.00, very familiar territory, with bids at Y80.00 seen to underpin the pair but stop-loss dollar sell orders located just below that level, perhaps a target for aggressive traders.
Yen traders remind that the dollar sits only modestly above the Y79.57 level that was the post-intervention low in dollar-yen seen after Japanese authorities, with help from their G7 counterparts, intervened aggressively March 18 to curb what was seen as unwarranted yen strength.
After rising to Y85.00, the dollar deflated vs. the Japanese currency and others, unwinding the bulk of those intervention inspired gains.
Better than expected U.S. economic data released Tuesday gave a slight lift to stocks.
May existing home sales fell -3.8% to a seasonally adjusted annual rate of 4.81 million vs. 4.80 million expected, down -15.3% from a year ago.
April sales were downwardly revised slightly to 5.00 million annual pace.
Non-seasonally adjusted May sales rose +4.8%.
Inventories were up to 9.3 months supply with 3.72 million units available for sale.
Sales were down in 3 of 4 geographic regions, with no change in the West.
The National median sales price was $166,500, down -4.6% from a year ago.
The National Association of Realtors economist said that although May was down again, actual closings did not drop as much as implied by the report on pending sales, and in fact next week's pending sales report is showing some 'solid gains,' of 15% to 20% increases, based on incomplete data.
EURO SUMMARY: Opened at $1.4362 after $1.4304/83 overnight range.
-- Euro held a firm tone as market counted down to Greek confidence vote though flows were described as only modest after the pair chopped back and forth in response to conflicting headlines. Euro lifted to $1.4380 in an early bounce but backtracked to $1.4360, seeing chop within that zone and bringing talk of semi-official or sovereign sales, further talk greeting a push to $1.4387 that also resulted in a dip to $1.4360. From there, euro made steady gains through the option cut and into midsession, underpinned by improving risk tone as signaled by firm US stocks, the euro pushing through $1.4400 shortly after the London close and pushing to highs at $1.44217 as stops were gunned atop $1.4405. Euro retreated from there, easing back under $1.4400 in afternoon dealings and finding a base at $1.4380 amid light flows. Later additional stock gains allowed euro to return to $1.4420 before ending around $1.4410, awaiting the Greek confidence vote.
YEN SUMMARY: Opened at Y80.17/115.14 after Y80.06/34 and Y114.64/115.35 overnight ranges.
-- Dollar pair continued to hug a narrow range atop Y80.00 with little to commend it, again leaving euro-yen to swing with the vagaries of euro-dollar which enjoyed risk-related support. Dollar pair saw slippage to Y80.04 area in early dealings as euro-yen tested support at Y115.00, the cross then returning to Y115.30 by the option expiry, giving dollar a boost to Y80.20. Late morning into afternoon saw dollar retreat again to Y80.03 as euro-yen wilted from Y115.48 highs seen on a euro spike for trade back at Y115.25. Later dealings saw the dollar locked inside Y80.04/16 while euro gains allowed the cross to end near Y115.50.
Dollar Rates in New York Trade:
Eur-Dlr Dlr-Yen Eur-Yen Stg-Dlr Dlr-Swiss 3:32 p.m. Tue 1.4402 80.15 115.45 1.6235 0.8408 1:38 p.m. 1.4391 80.12 115.30 1.6225 0.8406 9:43 a.m. 1.4372 80.12 115.15 1.6203 0.8433 7:33 a.m. Tue 1.4362 80.17 115.14 1.6192 0.8440 3.22 p.m. Mon 1.4295 80.25 114.72 1.6180 0.8470 7:30 a.m. Mon 1.4217 80.28 114.15 1.6169 0.8468 3:25 p.m. Fri 1.4290 80.06 114.42 1.6167 0.8487 End 2010 1.3377 81.15 109.10 1.5599 0.9335

No comments:

Post a Comment