Greece debt fears sting euro, steady dollar
NEW YORK – The euro declined against other major currencies on Friday, weighed down by anxieties Greece may soon default on debts that also drove safe-haven buying of the dollar.
Greece is days away from potentially missing debt repayments of 1.6 billion euros to the International Monetary Fund, and investors are looking to an emergency meeting next week where euro zone leaders will try to find a way to unlock aid for Athens.
Germany, the biggest European contributor to bailout programs that have kept Greece afloat for five years, insisted it still was not too late for Athens to come to terms with its creditors at the EU and IMF.
The European Central Bank on Friday raised the ceiling on emergency liquidity that Greek banks can draw from the country’s central bank for the second time this week, a banking source told Reuters.
Bankers told Reuters that about 4.2 billion euros had flooded out of Greek bank accounts this week despite central bank efforts to restore calm.
The euro was last off 0.02 percent against the dollar at $1.1355, after sinking under $1.13 to a session low of $1.1294.
Versus sterling, which strategists say is something of a safe-haven, the euro fell as low as 71.22 pence EURGBP=, its weakest since May 28. It was last down 0.11 percent to 71.48 pence.
The euro was also lower against the Swiss franc and yen, both traditionally safe plays EURCHF=EBS EURJPY=.
The dollar had been trading weakly since Wednesday, when Federal Reserve policymakers dulled expectations of imminent hikes in U.S. interest rates, but rose modestly on Friday.
The dollar index .DXY was up 0.02 percent after touching its lowest in a month on Thursday.
“Greece remains highly combustible, and that’s a recipe for dollar strength and risk aversion,” said Richard Franulovich, senior currency strategist at Westpac in New York.
The dollar gave up early gains against the yen, hurt by a price rally in Treasuries debt that lowered U.S. bond yields. It last stood at 122.62 yen JPY=, off 0.28 percent.
The dollar has been rallying for nearly a year but this week was on track for a third consecutive week of losses. Some analysts still see the dollar climbing.
“When we get to where we can see the white of the eyes of the Fed rate hike, we will have a second wave of the dollar rally,” said Greg Anderson, global head of FX strategy at BMO Capital Markets in New York. – Reuters