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FOREX-Euro up on Greek deal, gains could be fragile
February 13, 2012 / 2:45 PM / 6 years ago

FOREX-Euro up on Greek deal, gains could be fragile

* Euro advances on relief over Greek parliament vote
    * Hurdles remain ahead of euro zone finmins meeting
    * Voluntary private sector involvement a worry

    By Luciana Lopez	
    NEW YORK, Feb 13 (Reuters) - The euro rose in light
volume on Monday on hopes a new Greek agreement on
strict financial reforms will be enough to secure critical
bailout funds, but analysts said further hurdles ahead could
keep gains short-lived.	
    With the Greek parliament passing a package of wage, pension
and job cuts as the price of a European Union and International
Monetary Fund (IMF) rescue ahead of a March bond redemption,
some of the immediate fears of a disorderly default by Greece
    But analysts said the euro's gains belied underlying
    "What we've basically seen is nobody is optimistic about the
euro," said David Watt, senior currency strategist at RBC
Capital Markets in Toronto. "I still think the bias is going to
be for people to sell into the rally."	
    With the Greek parliament tightening the belt despite
violent protests, attention will shift to Wednesday's meeting of
euro zone finance ministers. 	
    The ministers still require Greece to explain how 325
million euros of this year's total budget cuts will be achieved
before they agree to the 130 billion euro bailout. 	
    "We think that Greece is going to get their money by March
20, but we still think the euro's going to sell off," Watt said.	
    Until then, volumes could stay light.	
    "Most people are just keeping their heads down, they're
doing things when they have to do it," he added.	
    The euro was up 0.5 percent at $1.3239, in sight of a
two-month high of $1.3322 last week. That level and the 100-day
moving average at $1.3325 were technical resistance points,
while traders said a large option expiry at $1.3300 was likely
to restrict further intra-day gains.	
    Analysts at Commerzbank said their euro/dollar order book
model showed a greater density of sell orders at current levels,
adding the $1.3090 area was where the balance became more
neutral, and any downside move may run out of steam there. 	
    Traders were somewhat wary of pushing the euro higher
because of uncertainty over whether private creditors would
agree to write down the value of their Greek holdings. Doubts
persist whether the necessary near-100 percent acceptance can be
achieved without triggering a credit default.	
    "Voluntary private sector participation is unlikely to be at
the levels the IMF and European authorities are looking for and
this is one of the reasons for our bearish view on the euro,"
said Chris Walker, currency strategist at UBS. 	
    Even if a voluntary agreement is reached, a debt swap could
take three to four weeks to finalize, leaving a tight deadline
before Greece faces a March 20 bond redemption of nearly 15
billion euros.	
    Germany's finance minister, Wolfgang Schaeuble, said in an
interview with German newspaper Welt am Sonntag that Greek
promises on austerity measures were no longer good enough
because so many vows had been broken. 	
    Still, Greece effectively voting to stay in the euro by
passing the measure has provided short-term relief to investors.	
    Fear of a major banking crisis has also subsided as the
European Central Bank was set to provide an unlimited amount of
three-year loans for the second time later this month after its
first operation in December.	
    Analysts said these factors have prompted institutional
investors to scale back on bearish positions in the euro. But
any bounce above $1.35 could see fresh shorts established.	
    Speculators have been cutting their net euro short positions
for the past two weeks, to 140,593 contracts last week from a
record 171,347 contracts two weeks previously. 	
    "If euro/dollar goes up to $1.35, it would be a good level
to short it," said Stuart Frost, head of absolute returns and
currency at fund manager RWC Partners. "Once it gets down to
$1.30 people will again buy it. So it's a range play."	
    He said short-term opportunities lay in selling the euro
against growth-linked currencies like the Australian 
and New Zealand dollars.	
    Both currencies outperformed the euro and rose amid improved
sentiment for risk assets after Greece's vote. The Australian
dollar was up 0.8 percent at $1.0745, though it was off a
two-month high of $1.0845 marked last week.	
    The New Zealand dollar rose 1.02 percent to $0.8349.

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