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Euro wobbles on Greek setback; EU finmin meeting eyed

TOKYO - The euro wobbled in Asia on Monday after Athens and its private creditors failed to agree on a debt swap deal that is vital to avert a chaotic default for Greece.

Private creditors said on Sunday they had come to the limits of what losses they could concede in a Greek debt swap, putting the ball in the court of the European Union and the IMF.

As a result, the euro fell 0.3 percent to $1.2895, moving away from $1.2930 late in New York on Friday. It fell as low as $1.2854 in thin early dealings.

“The euro stalled ahead of $1.30 last week and unless the Greek talks come to some constructive conclusion soon, it’s hard to see it break that level in the near future,” said Sumino Kamei, a senior currency analyst at Bank of Tokyo-Mitsubishi UFJ.

Kamei said the euro was poised for some choppy trading with low volumes exacerbating volatility as many Asian centres including China, Hong Kong and Singapore are closed for the Lunar New Year holidays for much of this week.

The focus now turns to a meeting on Monday of euro zone finance ministers who will decide what terms of a Greek debt restructuring they are ready to accept in order to pave the way for a second bailout package for Athens.

Once the guidance from the ministers is clear, talks on the restructuring could be finalised later in the week.

Traders said a clear break of $1.2870-80 could see major support at $1.2800-10 tested. Last Friday, the single currency hit a 2-1/2 week high at $1.2987, having risen nearly 3 percent from a 17-month trough of $1.2624 plumbed on Jan. 13. Any upside on Monday was limited by the Kijun line on charts at $1.2912.

Speculators boosted net euro shorts to a fourth straight record in the week to Jan. 17, suggesting the downtrend for the single currency remained intact.

Some traders said that unwinding of these positions may yet give the euro a fillip in the near term and push it through reported offers around $1.30 in thin holiday trade, although further gains above that level could be difficult.

Against the yen, the euro was at 99.34, down from last week’s peak around 100.33. On the Australian dollar, it fetched A$1.2295, not far off a record low around A$1.2220 set on Jan. 17.

Renewed euro weakness helped the dollar index climb 0.1 percent to 80.324. Against the yen, the greenback bought 77.05, having retreated from last week’s high of 77.31.

Despite the dollar’s generally firmer tone, commodity currencies such as the Australian dollar held their ground. The Aussie stood at $1.0483, having touched an 11-week peak of $1.0495 earlier in the session.

“The AUD’s break above 1.0450 on Friday maintains the positive momentum since the middle of December and suggests an upward bias today with minor resistance at 1.0500,” said Besa Deda, chief economist at St. George Bank in Sydney.

Australia producer prices rose 0.3 percent in the October-December quarter, a touch below forecasts for a 0.4 percent increase.

Key Australian data this week is Wednesday’s CPI. A tame number would cement expectations for an interest rate cut at the central bank’s Feb. 7 policy meeting.

For the wider market, the Federal Reserve’s two-day policy meeting starting on Tuesday will be the major event. Although no policy change is expected, the Fed could take the historic step of announcing an explicit target for inflation as part of its new communication strategy.