FOREX-Euro rallies on Greece safety net – Yahoo! Singapore News

FOREX-Euro rallies on Greece safety net – Yahoo! Singapore News

* Euro gains broadly as Greece safety net reduces risks

* Uncertainties remain; euro down 6.6 pct vs dlr in 2010

* Euro could fall to $1.3000 – analyst

NEW YORK, March 26 – The euro rallied on Friday after euro-zone leaders agreed on a financial safety net for Greece, but uncertainties remained over the country's ability to repay debt.

Euro-zone policy-makers agreed on an aid package under which Greece would receive both bilateral loans from euro-zone partners and funding from the International Monetary Fund if it faced severe difficulties. [ID:nLDE62N2R1]

The plan did not alleviate longer-term worries about Greece and other fiscally vulnerable economies in the region, such as Portugal and Spain. That curbed euro gains.

Analysts said the agreement is limited because it only offers funding as a last resort and only with unanimous euro- zone approval.

The package reduces some of the biggest risks on Greece and the euro responded to that, said Daniel, Katzive, a director for global foreign exchange at Credit Suisse, in New York.

“But ultimately, the markets remain apprehensive over their fiscal situation and it will be hard for the euro to gain real traction against the dollar in the short term,” he said.

Greece is saddled with borrowing costs more than double those of Germany and must borrow around 16 billion euros ($21.3 billion) between April 20 and May 23 to refinance maturing debt.

In mid-afternoon trading in New York, the euro was up 0.9 percent against the dollar at $1.3400, recovering after trading as low as $1.3268, according to Reuters data.

The euro was bolstered by Bank of Greece Governor George Provopoulos telling reporters the country is not likely to make use of the EU-IMF financial aid facility. [ID:nATH005316]

Around the same time, the Greek prime minister George Papandreou said the message to markets was to “stop the rumors, focus on facts”. He said the Greek banking system is healthy and not under any threat. [ID:nBFA001134]

Despite Friday's gains, the euro fell against the dollar for the second straight week.

In the United States, the dollar had a limited reaction to a government report showing the country's economy grew at a slightly less brisk pace than previously estimated in the fourth quarter. [ID:nCLAQEE608]

The greenback fell 0.2 percent to 92.51 yen after touching its highest level against the Japanese currency since early January on Thursday.

Meanwhile, the euro advanced 0.8 percent to 123.97 yen .

LINGERING DOUBTS

Concerns about Greece's fiscal health have driven the euro down more than 6 percent versus the dollar this year. The currency is likely to resume declines despite potential aid.

“This buys the euro a bit of time, but nothing fundamental has changed, and Greece still has to roll over its debt,” said Michael Hewson, an analyst at CMC Markets, in London.

Hewson said the previous support around $1.3480 had become a significant resistance level. A weekly close below here would “reinforce a downside trend in euro/dollar, potentially taking it down toward $1.3000,” he said.

“It is unclear if the pressure on the euro is fully lifted in the near term,” currency analysts at Scotia Capital said in a note. “This still leaves the euro with the stigma hanging over it that euro zone countries were unwilling to keep the solution euro area specific.”

(Additional reporting by Jessica Mortimer in London; Editing by Andrew Hay)

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