Reuters: US Dollar Report: FOREX-Euro drops for 7th day vs dlr on political uncertainty

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FOREX-Euro drops for 7th day vs dlr on political uncertainty May 8th 2012, 16:38 Tue May 8, 2012 12:38pm EDT * Euro falls below $1.30, options expiries keep euro supported * Uncertainty looms after election results in Greece, France * Options market highlights bearish euro stance By Julie Haviv NEW YORK, May 8 (Reuters) - The euro fell for a seventh straight session against the dollar o n T uesday on worries that political uncertainty in Greece and a French leadership change could threaten austerity plans seen as key to tackling the euro zone debt crisis. The euro dropped below the psychologically important $1.30 level after the leader of Greece's Left Coalition party said the country's commitment to an EU/IMF rescue deal has become null and void. "Today's euro weakness is overwhelmingly tied to Greece's difficulty putting together a government," said Daniel Hwang, senior currency strategist at Forex.com in New York. "It is an overall risk off day, however, and the euro will likely remain under pressure due to all the political uncertainty out of Europe." Greece's two main pro-bailout parties failed to win a majority in weekend elections, leaving questions over the country's ability to avert bankruptcy and stay in the euro. Meanwhile, Socialist French President-elect Francois Hollande has advocated an approach to tackling the debt crisis centered more on growth, which may create tensions with Germany's insistence on fiscal austerity. The euro last traded down 0.3 percent at $1.3018, retreating from a session low of $1.2981 and above a trough of $1.2955 hit on Mo nday, which was its weakest since late January. The euro's rebound could be due to market participants trying to prevent an option that expires later o n T uesday from being triggered at below $1.30, according to a forex options trader. Technical support for the euro is in the $1.2955/73 area, the previous session's low and the Feb. 16 low. A break below that could send the euro to its 2012 low at around $1.2624, according to Reuters data. Options investors are biased to euro puts, or bets on the currency's depreciation, with three-month euro/yen risk reversals at -3.5 vols on Tuesday, flat from the previous day, but up from -3.0 vols a week earlier.Analysts also said that some in the market were coming to the view that a mixture of growth and austerity may be necessary to get the euro zone economy back on its feet, given the deep economic problems facing some euro zone countries that have implemented austerity measures. Greece's Left Coalition party will get a chance to form a government opposed to the country's EU/IMF bailout, after the mainstream conservatives failed to cobble together a coalition. "As far as markets are concerned, we've seen repeatedly that fiscal irresponsibility gets punished more than a lack of growth," said Simon Grose-Hodge, head of investment advisory for South Asia at LGT Bank in Singapore. He expects any short-covering rally in the euro over the coming month would be limited to around $1.32, adding that the euro could fall to around $1.28-$1.29 in that timeframe. The euro was down 0.4 percent against the yen at 103.84 yen, above a three-month low of 103.22 yen hit o n M onday while the dollar was down 0.1 percent at 79.78 yen. Link this Share this Digg this Email Reprints

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