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Euro falls sharply on Greek debt concerns

Euro falls sharply on Greek debt concerns
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First Published: Thu, Apr 22 2010. 12 01 AM IST
Updated: Thu, Apr 22 2010. 12 01 AM IST
London: The euro fell sharply against the dollar on Wednesday as the money markets turned against Greece which began talks with European officials and the International Monetary Fund on its vast debt.
Dealers said the market was betting that Athens will eventually have to ask for implementation of an EU-IMF aid package, with yields, the rate of return, on Greek benchmark 10-year bonds at record levels above eight percent.
At that level, Greece will not be able to afford to raise fresh funds and so will have to seek help as its debt obligations fall due, they said.
In late London trade, the euro was down at $1.3382 , off a low of $1.3359 around midday but still well short of trades at $1.3436 in New York late on Tuesday.
Against the Japanese currency, the dollar was slightly firmer at ¥93.24 from ¥93.17 on Tuesday.
European Union and IMF experts began 10 days of crucial talks in Athens on Wednesday to work out details of their rescue package for Greece.
Together with the European Central Bank, they opened talks with Greek finance minister George Papaconstantinou on probable “financial assistance”.
“The IMF/EU/ECB have finally been able to gather in Athens for a series of meetings expected to take around 10 days,” said analyst Jane Foley at trading site Forex.com.
“The Greek (prime minister) has reassured the markets that the €30-billion funding from the EU could be triggered and received within weeks, if this facility is called upon.
“This should dampen fears that the constitutions of some EU countries may have to be altered to allow a loan to Greece.”
Amid strong signs that Greece is getting ready to appeal for help, the Greek finance ministry added: “The discussions concern a three-year programme of economic policies.”
This “can be supported with financial assistance from eurozone members and the International Monetary Fund should Greek authorities decide to request the activation of the mechanism,” it said in a statement.
Greece needs about €10 billion within the next few weeks and about €30 billion euros in total for the rest of the year to pay its bills and allow it to press ahead with massive budget cuts and structural reforms.
“Markets remain wary of any deal for Greece until it is actually delivered,” said Barclays Capital analyst Huw Worthington in a research note.
In London trade on Wednesday, the euro was at $1.3382 against $1.3436 on Tuesday, at ¥124.78 (125.23), £0.8691 (0.8744) and 1.4328 Swiss francs (1.4353).
The dollar stood at ¥93.24 (93.19) and 1.0710 Swiss francs (1.0683).
The pound was at $1.5397 (1.5365).
On the London Bullion Market, the price of gold eased to $1,143 an ounce from $1,144.75 an ounce on Tuesday.
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First Published: Thu, Apr 22 2010. 12 01 AM IST