Does the now-approved Greek austerity plan mean an end to euro currency problems?
*MarketWatch, by Deborah Levine & William L. Watts, June 29, 2011
”The euro rose to its highest level in two weeks against the dollar on Wednesday, after Greece’s parliament approved an austerity plan deemed necessary to allow the debt-strapped country avoid default.
The euro erased most of its gains immediately after the vote as traders had built in expectations of the plan passing, so were reversing those bets ahead of another Greek vote Thursday on how to implement the measures.
‘Today’s vote keeps the situation from falling into the abyss, but it is not clear how far from it the situation remains,’ said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
The euro rose as high as $1.4448, then dipped to $1.4418 in recent action. It’s still up from $1.4366 in late North American trading on Tuesday.
The dollar index, which measures the performance of the U.S. unit against a basket of six currencies, pared its decline to 74.724 from 75.059 late Tuesday. It had fallen to 74.651 before the vote.
Against the Japanese yen, the euro turned back up by 0.2% to buy 116.67 yen. The single currency extended gains to 0.8% versus the Swiss franc and was little changed compared to the British pound.
Greek Prime Minister George Papandreou on Wednesday secured the votes needed in parliament to approve a 78 billion euro ($112.2 billion) package of additional austerity measures and asset sales, while police clashed with protesters in central Athens.
European stock markets also pared gains after the vote and short-term Treasury prices gained, pushing yields lower — both indicating a reversal of investors’ expectations for the plan passing.
‘Some profit-taking was to be expected given how broadly anticipated the ‘yes’ vote was,’ said Michael Woolfolk, senior currency strategist at Bank of New York Mellon. However, ‘without popular support for these austerity measures or any indication of how Greece will pay for these measures in the long-term, it is unlikely that this vote reflects an important outcome — let alone a final outcome.’ ”
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