Euro Gains Versus Dollar, Yen After Greece’s Pandreou Wins Confidence Vote
By Allison Bennett - Jun 22, 2011 12:16 AM GMT+0200 Tue Jun 21 22:16:24 GMT 2011
June 21 (Bloomberg) --The euro rose against the dollar and the yen after Greek Prime Minister
George Papandreou won a confidence vote in parliament, taking the Mediterranean nation one step closer to avoiding default on its debt.
The shared currency rose after Papandreou received 155 votes. He needed 151 to prevail. The
Federal Reserve began a two-day policy meeting.
“The euro will trade higher,”
Jessica Hoversen, a New York-based analyst at the futures broker MF Global Holdings Ltd., said before the vote. Greek lawmakers “recognize that the market needs to believe that Greece is going to get that $12 billion tranche and a vote for the government is a vote for the package.”
The euro rose against the dollar to $1.4391 at 6:15 p.m. in New York, from $1.4304 yesterday. It earlier touched $1.4423, the strongest level since June 15. The euro gained against the yen to 115.52, from 114.80.
The confidence ballot cleared the way for a separate vote on a 78 billion-euro ($112 billion) package of budget cuts and asset sales to ensure the payment of 12 billion euros due in July under last year’s 110 billion-euro bailout from the European Union and the
International Monetary Fund. It also was needed for consideration of a second rescue plan.
Pleas for Consensus
Papandreou called last week for the confidence vote after opposition parties rejected pleas for national consensus and his handling of the crisis led to defections from his party.
The dollar weakened earlier before the Federal Open Market Committee issues an interest-rate decision tomorrow. Policy makers will keep the benchmark interest rate at zero to 0.25 percent tomorrow, where it’s been since December 2008, a Bloomberg News survey forecast.
Futures show the likelihood policy makers will increase the target rate by March 2012 dropped to 21 percent from 30 percent a month ago.
Sales of existing homes in the U.S. decreased in May to the lowest level in six months, an annual pace of 4.81 million, National Association of Realtors data showed today. The report followed data from the
New York and Philadelphia Fed Banks last week showing manufacturing in those regions shrank this month.
“The slowdown we’ve seen has pushed out the expected Fed tightening,” said Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York. “We’ve had two and a half months of data and the timing of expected Fed tightening is pushed out by 10 months. The market may be extrapolating the softness for a longer period than they have any right to.”
Dollar Index
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell 0.4 percent.
The Standard & Poor’s 500 Index gained 1.3 percent, and the Thomson Reuters/Jefferies CRB Index of raw materials increased 0.6 percent. Crude oil rose as much as 1.6 percent to $94.74 a barrel in New York before briefly reversing gains.
The euro earlier rose versus most major currencies as
Greece’s Papandreou sought to secure multiparty support for his government’s austerity measures. He called last week for the confidence vote after opposition parties rejected pleas for national consensus and his handling of the crisis led to defections from his party.
Luxembourg’s Jean-Claude Juncker assured investors yesterday that a solution will be found to Greece’s debt crisis.
Implied volatility for one-week Euro-U.S. dollar options has slumped 195 basis points to 13 percent over the past three days. It closed at 14.98 percent on June 16, the highest level since May 6. Implied volatility, which traders quote and use to set option prices, signals the expected pace of swings in the underlying currency. A basis point is 0.01 percentage point.
The pound weakened 0.5 percent to 88.73 pence per euro and rose 0.2 percent to $1.6238 after Bank of England Markets Director
Paul Fisher said further bond purchases to stimulate the economy are possible.