Euro stabilizes after Greek vote, Fed eyed
Tuesday, June 21, 2011 by Admin
The euro stabilized on Wednesday and Asian shares rose after the Greek government won a vote of confidence as expected, prompting investors to shift focus to the Federal Reserve's news conference due later in the day for further cues.The euro last traded at $1.4366, extending its recovery from a three-week low of $1.4073 it hit last Thursday, but below the high of $1.4435 it touched after the vote in Athens, bringing the beleaguered country a step closer to a 12 billion euro aid package.
If Greece avoids defaulting on its sovereign debt, it could help renew confidence in the single currency, though the head of the world's largest bond fund Pimco said Greece's way out of its debt problem would be through default.
Next in line is the Fed meeting which began on Tuesday, against the backdrop of a weakening U.S. economy that will likely force policymakers to plan for the possibility that things may get worse.
Chairman Ben Bernanke will address the media at 1815 GMT and is widely expected to revise down the Fed's earlier quarterly forecasts for U.S. GDP growth.
This is unlikely to be good news for the dollar, Credit Agricole's head of global FX strategy Mitul Kotecha said in a briefing note, "given that the Fed is set to downgrade its growth forecasts, with the comments on the economy likely to sound a little more downbeat given the loss of momentum recently as reflected in a string of disappointing data releases."
The dollar index .DXY, which tracks the dollar against a basket of major currencies, fell to a one-week low at 74.516, well off last week's peak of 76.015. It was last at 74.778.
Against the yen, the dollar was little changed at 80.25, comfortably within the prevailing 79.50-81.50 range.
Greece's vote outcome sheered Asian stock markets, especially Japan's Nikkei .N225 which rose for the third day in a row, gaining 1.4 percent at 9595.26.
Financial services firms were among the big gainers, following rivals elsewhere which rose on hopes that the vote will prove a step toward resolving the European debt crisis, one of the most persistent worries for markets.
"The market is up on Greece, but it's a temporary rise on a news event. We may see some more short-covering going into the afternoon, but that's about it -- fundamentals haven't changed a notch," said Mitsushige Akino, chief fund manager for Ichiyoshi Investment Management.
MSCI's index of Asia-Pacific stocks .MIAPJ0000PUS excluding Japan was up 0.7 percent, while indices in Hong Kong .HSI and South Korea .KS11 also rose.
Brent crude oil for delivery in August made a partial recovery to $111.30 a barrel after falling more than 70 cents on Tuesday, largely on ongoing worries about the euro zone.
Gold inched up to $1,546.65 per ounce by 0200 GMT, little changed from Tuesday's close.
Gold, one of the chief beneficiaries of worries about the security of currencies and other assets, set a record high of $1,575.79 per ounce in early May. Copper was down slightly at $9,039 per tonne after rising almost 1 percent in the previous session.
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