Euro whipsaws on Greek official comments

Frankfurt (May 27)  The euro traded back-and-forth against the dollar on Wednesday, amid comments made by a Greek official indicating that Greece and its creditors have started to put together a staff level accord.

"At the Brussels Group today procedures to draw up a staff-level agreement are beginning," the official said.

The statement appeared to suggest significant progress in talks with EU and IMF creditors that form the Brussels Group, though sources close to the lenders have so far not indicated any such progress to merit drawing up an agreement.

The official also cited differences between the EU and IMF as holding up an overall deal.

The euro last traded slightly lower against the dollar at $1.0876.

Earlier, some muted signs of concern from senior Japanese officials failed to halt the yen's slide to eight-year lows against the dollar on Wednesday as the U.S. currency eked out further gains against most major currencies.

Dealers said steady bids for the dollar through London's benchmark fixing at 1000 GMT had helped trigger automatic sell orders for the yen around 123.45 and 134.60 yen per dollar and euro respectively, driving it to an 8-year low.

The euro also gave back initial gains to fall to another one-month low of $1.0845 as U.S. traders came on line, adding to a week-long rally that has revived faith in the U.S. currency's ability to push towards parity.

Tokyo's Economics Minister Akira Amari said that while recent movements reflected the dollar's gain rather than the yen's fall, excessive currency moves were undesirable, echoing earlier signals from the finance ministry and Bank of Japan.

"There has been a steady bid out there, and that seems to have triggered stops this morning," said a senior dealer with one international bank in London.

There have been some signs of improvement in data on the U.S. economy in the last few days, along with comments by U.S. central bankers shoring up expectations that the Federal Reserve can consider raising rates in the second half of this year.

Against those positive signals for the dollar are a disappointing first quarter and other indicators that suggest many major economies are struggling.

The euro's earlier recovery, however, looked chiefly like a resetting of positions after the dollar gained more than five cents against the euro in just over a week.

"I would hesitate to put the moves overnight down to any specific event," said Neil Mellor, a strategist with Bank of New York Mellon in London.

"The underlying theme is of dollar strength. Perhaps June has gone out of the window but I think the market is more and more comfortable with the idea that rates will rise later in the year."

The dollar index was last flat on the day at 97.31.

The Australian dollar also continued to suffer, hitting $0.7722. Its New Zealand peer traded flat at $0.7241.

Source: CNBC