Reuters: US Dollar Report: FOREX-Anti-austerity votes press euro lower

Reuters: US Dollar Report Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

FOREX-Anti-austerity votes press euro lower May 7th 2012, 11:26 Mon May 7, 2012 7:26am EDT * Anti-cuts votes in Greece, France push euro lower * Greece uncertainty biggest blow to common currency * Break below $1.30 opens door to test of 2012 low By Nia Williams LONDON, May 7 (Reuters) - The euro fell heavily across the board on Monday after Greek and French elections cast doubt on politicians' commitment to austerity plans aimed at tackling the euro zone debt crisis. Traders said the euro, which hit a three-month low against the dollar, its lowest in 3-1/2 years against the British pound and a 2-1/2 month trough versus the yen, was likely to suffer further losses in coming days. In the biggest blow to the common currency, the failure of Greece's two main parties supporting the country's international bailout to secure a parliamentary majority threw into question the future of the programme and potentially the country's membership of the euro. In France, Socialist Francois Hollande, who has pledged to balance the budget but more slowly than his opponent, ousted centre-right incumbent Nicolas Sarkozy. The result could trigger a push-back against German-led austerity across the euro zone. The euro sank to a session low of $1.29552 on trading platform EBS, breaking below the $1.30 to $1.35 range it has been trapped in since late January. It was last down 0.4 percent on the day at $1.3024, paring some losses on demand from Middle Eastern investors, traders said. "The reaction in the foreign exchange market shows if it really comes to the point where it's clear European politicians will step back from austerity measures that will be perceived as very negative by financial markets," said Lutz Karpowitz, currency analyst at Commerzbank. "In Greece it's maybe the worst outcome we could have had there. It looks impossible to find a government that will be in favour of austerity." Trade was muted during the European day due to a UK public holiday, but some strategists said the test of the lower end of the euro's recent tight range meant it could fall towards the 2012 low around $1.2623. Nomura forecast the euro would slide in the near term to a range between $1.26 to $1.28 before consolidating, while Nordea currency strategist Niels Christensen said the euro could hit $1.29 during New York trade on Monday if U.S. equities fell. "After being in a range for three or four months investors will be eager to try and establish a trend lower in the euro with a break below $1.30," Christensen said. For now, the euro has support at $1.2950, a major option barrier and the 61.3 percent retracement of its rally from its January low to a high in February, although uncertainty over Greece could overwhelm this. With the majority of votes counted, the conservative New Democracy (ND) and socialist PASOK parties, which were the only parties supporting a bailout programme, were seen falling short of the 151-seat threshold needed for even the most fragile majority in parliament. While Hollande's victory had been widely anticipated, some market players worried that his focus on growth measures to temper austerity could lead Paris to clash with Germany's insistence on tough deficit reductions. The euro fell to 80.37 pence against the pound, a level last seen in November 2008 after the Lehman Brothers collapse. The common currency hit 103.23 yen on trading platform EBS, its lowest since mid-February. RISK AVERSE Disappointing U.S. jobs data on Friday added to investors' aversion to riskier currencies and prompted traders to cut exposure to the growth-correlated Australian dollar. The Aussie fell to a new 2012 low of US$1.0110, although solid Australian retail sales data helped it recoup losses to last stand at US1.0190, up 0.15 percent on the day. The U.S. dollar was steady at 79.83 yen, having fallen back below 80 yen, seen as a support, on Friday after the U.S. jobs numbers. However, it had support around a two-month low of 79.64 yen hit last week and 79.14 yen, a 61.8 percent retracement of its rally from February to March. Uncertainty over the euro zone helped the dollar index to a three-week high of 80.176. Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions