Euro rises against dollar on Greek loan move
London (Feb 19) The euro edged higher against the U.S. dollar Thursday, finding support as Greece took a step toward solving its debt troubles.
Meanwhile, the greenback recovered losses against the yen that had been triggered by dampened hopes on the timing of a Federal Reserve rate hike.
The euro EURUSD, -0.18% was at $1.1405, up from $1.1398 late Wednesday, after Greece submitted a formal request for an extension to its loan agreement. Eurogroup President Jeroen Dijsselbloem said on a post to Twitter the country is asking for a six-month extension. Senior eurozone finance ministers were expected to discuss the request at a meeting Thursday.
Greece has been making a distinction between a loan agreement and its 240-billion-euro ($273 billion) bailout program that’s set to end later this month.
If Greece’s request “is given the green light, this could push the euro higher,” after trading in a narrow range in recent sessions, said Naeem Aslam, chief market analyst at Ava Trade, in a note. The country’s government made the move a day after the European Central Bank approved a request from Greece’s central bank to provide €68.3 billion in emergency funding to its country’s banks.
As for the prospects for the extension request, “a positive outcome could be on the cards from EU officials as well, and traders will love this news,” Aslam said. That could result in the euro-dollar pair moving toward $1.17, he added.
Against the yen, the dollar USDJPY, +0.16% was buying ¥118.88, versus ¥118.63 on Wednesday. The greenback fell overnight, after minutes from the U.S. Federal Reserve’s last policy meeting reduced hopes for higher interest rates around the middle of this year.
The Fed minutes showed many officials warning that a premature rate increase might weigh on economic growth. After their release, the two-year U.S. Treasury note suffered its biggest one-day drop in more than three years.
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“The FOMC minutes were not as hawkish as the market had expected,” said Shusuke Yamada, chief FX strategist at Merrill Lynch Japan, adding that lackluster U.S. economic indicators are also keeping a lid on the dollar’s upward momentum.
In addition, better-than-expected Japan’s merchandise trade balance is having a synergetic effect by weighing down the dollar, said Yamada.
“It wouldn’t be a surprise if the dollar goes up in terms of the technical chart. But possibility is increasing that the dollar will be trapped in a range (currently between ¥117 and ¥119) for longer than expected,” said Yamada, adding that investors are cautious about possible jawboning from Japanese authorities ahead of upcoming local elections scheduled in April.
The WSJ Dollar Index BUXX, +0.26% a measure of the dollar against a basket of major currencies, was up 0.1% at 85.34.