Once Again Greek Debt Concerns Plague Currency Markets

Posted April 16, 2010

Debt Greek concerns cause euro to struggle. US data is a mixed bag for the economy.


Euro Suffers

The euro suffered significant losses in the currency markets on Thursday. Once again, it is Greek debt that is causing the euro’s suffering. Now, there is concern that the Greek debt is still unresolved because of reports that there is little demand for the dollar denominated bond that the Greek’s plan to issue in late April.

The euro did see some improvement after solid US economic data was released on Thursday. It also improved because stocks moved into positive territory for the day and there was some relief after an announcement that Greece would meet with the International Monetary Fund. The meeting, which is scheduled for Monday, allows the country to speak to the IMF about multi year financing plan that the IMF has offered to the euro zone.

Nevertheless, this information is not complete and investors want more details of what this type of plan might include. The euro is likely to remain in difficult territory until more information is released about the plan. In trading, the euro fell by as much as 0.6 percent against the US dollar by just late morning trading. Some believe that the problem with the Greek debt situation is that traders simply do not have the information they need to be confident in it. If more information was provided, the market would be less likely to rebound.

By the Numbers

The euro moved from $1.3657 on late Wednesday to $1.3568 during Thursday trading. The US dollar traded from Y 93.18 to Y 93.29 during trading in comparison to the euro which traded at Y 126.58 from Y 127.28. The US dollar moved from CHF 1.0517 to CHF 1.0575 during trading. The UK pound moved from $1.5469 to $1.5494 during trading. The ICE Dollar Index showed that the US dollar moved from 80.186 to 80.488 during trading. This is an index that tracks movements in the US dollar against a basket of trade weighted currencies.

US Economy

Also playing  a role in the currency markets on Thursday was the data released by the US government on the economy. The data that was released shows a mixed picture about the US economy and its path to recovery. On the negative aspect, weekly jobless claims soared unexpectedly. In addition, industrial production figures were worse than what was expected by most economists. On the flip side, a regional Fed survey from New York and Philadelphia came in which was better than expected.

Some of this data helped to support the risk taking that many investors are looking for and that led to a slight improvement in the losses the euro suffered against the US dollar. Jobless claims rose by 24,000 this week to 484,000, in the week ending April 10th. This is the second week in a row that jobless claims have risen, when they were initially expected to drop significantly. Most investors believe that the market is simply struggling to find direction.