FOREX-Euro wallows at 3 1/2-month low on Greek political stalemate

Wed May 9, 2012 8:45pm EDT

Related Topics

* Euro hurt by political impasse in Greece

* Investors think reheld election could lead to euro exit

* Yen supported by broad risk-averse mood

* Aussie near 5-month low, awaits data

By Hideyuki Sano

TOKYO, May 10 (Reuters) - The euro wallowed near a 3 1/2-month low against the dollar on Thursday as political deadlock in Greece threatens its rescue deal and raises the spectre of the country leaving the euro zone.

Worries that the euro zone could plunge back into a debt crisis, after a semblance of stability in the past few months, were also hurting growth-linked currencies such as the Australian dollar.

"Uncertainty over Greece is going to weigh on markets," said Sumino Kamei, senior currency analyst at the Bank of Tokyo-Mitsubishi UFJ.

"There's now open talk about Greece's exit from the euro. The euro is likely to have moved into a new range below $1.30."

The euro fell as low as $1.29115 on Wednesday, having broken below technical support at a 61.8 percent retracement of its rally earlier this year from $1.2624 to $1.3487.

It last stood at $1.2936, with next possible support seen around $1.2819, the 76.4 percent retracement of the same rise. Against the yen, the euro stood at 103.02 yen, near a three-month low of 102.76 yen touched on Wednesday.

Greek Leftist leader Alexis Tsipras gave up his attempt to form a new government on Wednesday, putting Greek Socialist leader Evangelos Venizelos in a position to make a last-ditch attempt to form a government on Thursday.

But chances of any deal on a coalition government looked slim after two failed attempts, making new elections in three to four weeks the most likely outcome.

With Athens due to run out of cash in June, a rerun of elections could be a make-or-break event for Greece as international lenders refuse to renegotiate the terms of the bailout, as Greek voters wanted.

With the latest troubles in the euro zone adding to concerns about tepid growth in the United States and China, market players shunned risk-sensitive currencies such as the Aussie dollar and favoured the safe-haven yen.

The Aussie hit a five-month low of $1.0021 on Wednesday, with the focus now on local employment data due at 0130 GMT as well as Chinese trade data.

The Australian unit has an important double Fibonacci support around $0.9945, a 76.4 percent retracement of its $0.9664-$1.0857 rise from November to February as well as a 61.8 percent retracement of the gain from October to February.

Against the yen, the Aussie hit a four-month low of 79.77 yen on Wednesday and last stood at 80.10 yen.

The yen is broadly supported, having recovered most of the losses that followed the Bank of Japan's easing in February.

The U.S. dollar stood at 79.71 yen, having hit its lowest in nearly three months, at 79.428 per dollar, on Wednesday.

The pound recovered from a two-week low of $1.6067 hit on Wednesday ahead of a Bank of England policy decision that will come later on Thursday. It last stood at $1.6136.

A majority of market players expect the bank to keep rates on hold and the quantitative easing total unchanged at 325 billion pounds ($523 billion), but some market players see a chance of the asset purchase programme being extended.

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