Reuters: US Dollar Report: FOREX-Euro still shaky on Greek exit jitters; China eyed

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FOREX-Euro still shaky on Greek exit jitters; China eyed May 24th 2012, 00:28 Wed May 23, 2012 8:28pm EDT * Euro off lows but outlook bleak * Fears of messy Greek exit from euro zone persist * EU leaders offer no comfort, HSBC's China PMI eyed By Ian Chua SYDNEY, May 24 (Reuters) - The embattled euro hovered just above a near two-year low against the dollar on Thursday and remained vulnerable to further declines as the prospect of a Greek exit from the euro zone kept investors on tenterhooks. The single currency last stood at $1.2570, having plumbed $1.2545 overnight, a low not seen since July 2010. That level should provide initial support, above the psychological $1.2500. Traders said only a break above the previous major lows at $1.2625-40 would help restore some stability in the euro over the short term. EU leaders announced no new concrete measures to solve the region's crisis after a meeting on Wednesday and traders said their comments only served to highlight the divide among politicians on how to tackle it. Three officials told Reuters that members of the currency bloc have been warned to prepare contingency plans in case Greece quits the euro, an eventuality that the German central bank said would be testing, but "manageable". "With a Greek exit once again being discussed, the pressure on the euro should continue especially with the lack of clarity on any of the pressing issues," analysts at BNP Paribas wrote in a client note. "EUR weakness is likely to be amplified against the USD and the JPY as the market seeks refuge (in the safe-haven pair) as negative risk sentiment persists." The safe-haven dollar jumped to its highest since September 2010 on a basket of major currencies. The yen, though, managed to outperform the greenback. The dollar fetched 79.44 yen, having retreated from Tuesday's high of 80.08, while the euro slid below 100 yen again, hovering just above a four-month low of 99.53 plumbed overnight. Also under pressure, the Australian dollar stood at $0.9746 and 77.43 yen, having skidded to fresh six-month lows around $0.9690 and 76.90 yen. Traders warned that markets will remain jittery and vulnerable to bouts of extreme volatility in the lead up to next month's elections in Greece. "Either sentiment improves after a new Greek government re-commits to the EU program, or financial conditions worsen much further as the possibility of a Greek exit rises," said Ajay Rajadhyaksha, strategist at Barclays Capital. "Our base case call is that there will not be an imminent Greek exit, simply because both sides have too much to lose. But it is difficult to recommend trades with a near-term horizon based on this call." In Asia, the main focus will be HSBC's flash reading of China's manufacturing sector due at 0230 GMT. A weak number there would no doubt add to fears about a hard economic landing in the world's second biggest economy, leaving commodity currencies like the Aussie susceptible to a further selloff. Link this Share this Digg this Email Reprints

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