FOREX-Euro slips for 7th day vs dlr; politics weigh - Reuters

Tue May 8, 2012 3:55pm EDT

  * Euro dips below $1.30 in early trade      * Uncertainty looms after election results in Greece, France      * Options market highlights bearish euro stance          NEW YORK, May 8 (Reuters) - The euro fell for a seventh  straight session against the dollar on Tuesday on concerns that  political uncertainty in Greece and a French leadership change  could undermine austerity plans viewed as central to tackling  the euro zone debt crisis.            The euro earlier dropped below the psychologically important  $1.30 level after the leader of Greece's Left Coalition party  said the country's commitment to an European Union/International  Monetary Fund rescue deal had become null and void.                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.             "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."              The euro last traded down 0.3 percent at $1.3012,  paring losses from a session low of $1.2981 and above a trough  of $1.2955 touched on Monday, its weakest since late January.         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.             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. The  euro/dollar three-month risk reversal posted at -2.60, also  biased to euro puts.                    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  103.85 yen, above a three-month low of 103.22 yen hit on Monday.  The dollar was down 0.1 percent at 79.80 yen on Tuesday.  

• Link this
• Share this
• Digg this
• Email
• Reprints