Euro Sees Stabilization But Athens Worries Investors

Posted March 18, 2010

Euro is stable but dollar rises. Greek debt on the minds of investors while the US economic news looks good.


One of the focal points of the currency markets on Thursday was the euro, specifically the fact that Athens reports that it may not be able to achieve some of the promises it made to cut the deficit, specifically if the borrowing costs to the country remain high.

Greece also dismissed information that reportedly the country planned to turn to the IMF in early April if European Union leaders had not come to an agreement on how to bail the country out of its debt trouble. The country did say that turning to the global lender would be the country’s last resort, but at this point, they had numerous options.

Euro Movement

The euro held close to a 17 month low against the Swiss franc in trading on Thursday. The news out of the Swiss today came from Swiss National Bank board member Jean Pierre Danthine.  He said that investors should prepare for rates to rise as they cannot stay ultralow for much longer.

The euro has been affected again by the Greek debt problems and the downward trend is unlikely to ease up soon, until the debt problems have been rectified.  By late Thursday, the euro was at $1.3612, down from the $1.3586 that it was at Wednesday. It was also significantly lower off the $1.3819 that it was at earlier this week.

The euro moved down against the Swiss franc by 0.1 percent to 1.4390 francs. It did reach as low as 1.4355 francs earlier, which is the lowest level since October of 2008. Against the yen, the euro was virtually flat, at 123.04.  The US dollar rose 0.1 percent to 90.51 yen, though.

The US Dollar

As the euro fell, the US dollar rose on Thursday. It also rose against the UK pound. Economic reports from the US government, as well as Greek debt concerns, helped the US dollar to gain some strength.
The dollar moved 0.9 percent up against the euro. It moved to $1.3609 and up 0.5 percent against the UK pound to $1.5246.

However good this may look for some investors, experts warn that the dollar itself was not necessarily behind the increase. Rather, the euro simply is weak because of all of the backpedaling occurring because of the Greek debt crisis.

However, some economic news out of Washington on Thursday did make a difference in the currency market. The US Labor Department stated that unemployment insurance dropped by 5,000 last week. This put it at 457,000 which is down from the revised 462,000 from the previous week.

Also key was that the Consumer Price Index for the country was unchanged in February. This was due to lower energy prices in the country that were offset by increases in other prices for food and other products. This low rate of inflation is likely behind the decision of the Federal Reserve on Tuesday to keep interest rates as low as they have been.

Nevertheless, it is unlikely that the dollar will keep up against the euro, especially once the Greek debt problems are improved.