Euro on Edge ahead of Greek Vote

Big 5

The euro was rooted near two-year lows on Monday ahead of a vote in Greece that could trigger fresh anxiety over the country’s future in the single currency zone.

The Swedish crown, down almost 7 percent this year in the absence of progress from a leaden economy, took some encouragement from a political deal that avoids an early election and sidelines anti-immigration party Sweden Democrats.

That and speculation – quashed by the Swiss National Bank – that the Swiss franc had traded beyond its 1.20 franc per euro cap were the main points of interest over the Christmas holiday period.

All eyes will be fixed on Monday on Greek MPs’ third and final chance to elect a new president and avert a snap election that could bring to power the leftwing Syriza party, long opposed to Greece’s international bailout and the austerity it demands.

“The pain trade is clearly for this vote to fail. I think we would get a fairly negative reaction from the euro if that happened,” said Alvin Tan, a strategist with French bank Societe Generale in London.

“I’m fairly sanguine about it to be honest. A lot of parliamentarians had a chance to make a cheap point against the government. Now the independents have to consider whether they would really get elected again.”

The previous round of voting just before Christmas saw Prime Minister Antonis Samaras a dozen votes short of the number he will need on Monday to elect a new president. Voting is due to start at midday, with the result likely around an hour later.

The euro was steady at $1.2184 in early deals in Europe, within touching distance of a more than two-year low of $1.2165 hit before Christmas.

Activity in general was thin and is likely to remain that way ahead of the New Year holiday with many investors having already closed out their positions for the year. Japanese markets will be shut from Dec. 31-Jan. 2 and reopen on Jan. 5.

While investors are betting the euro will fall against the dollar next year as speculation grows that the European Central Bank will ease monetary policy more aggressively, it may not depreciate at all against currencies of other major trading partners. The single currency has fallen 11 percent this year against the dollar.

Source: Reuters

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