Yen, Dollar Fall Against Majors

The yen and US dollar fell against most major currencies after Greece employed banks to sell seven year bonds in the first Greek bond sale since the EU agreed on a loan mechanism  to aid the heavily indebted Athens government. The announced bond sale sparked a rise in risk sentiment although some experts believe the relief will be temporary. John McCarthy of ING Groep NV I stated, “There’s temporary relief over Greece. It’s also all across the board. The Aussie and kiwi are higher, firmer equity markets, relief over Greece helped pushed the dollar lower.” The yen fell 0.4% vs. the euro trading at 124.56. The euro advanced 0.3% vs. the dollar to $1.3450. The euro has gained ever since the EU IMF deal was announced although details remain unclear. IMF head Dominique Strauss-Kahn said that Greece has not yet asked the IMF for aid and shows no signs of needing  IMF aid anytime soon. Strauss-Kahn told an audience in Warsaw, “I hope that the EU strategy for Greece works. We are ready to help Greece as with any of our members but it is not obvious today that help will be absolutely necessary.”

Trichet Says Including IMF Could Damage Euro’s Credibility

Under the deal reached with the EU the IMF would provide one third of necessary funds if a rescue package for Greece is needed with the euro zone providing the rest of the funding. Details of the agreement are still unclear and have yet to emerge. IMF involvement was a condition imposed by conservative German Chancellor Angela Merkel despite opposition by the European Central Bank. Jean Claude Trichet has repeatedly stated that requesting IMF aid could create the impression that the EU cannot manage its own problems and puts the credibility of the euro at risk. Greece has imposed austerity measures including tax hikes and wage cuts and is hoping for a successful bond sale.

Fitch Outlook For Greece Remains Negative

Despite the EU IMF agreement Ftich’s rating for Greece remains negative. Ratings agencies Standard and Poor’s and Moody’s said their outlook on Greece will not be affected by the EU IMF deal. In a statement Fitch said, “The (EU) statement was positive for Greece’s credit profile by enhancing its near-term financing options and flexibility as well as reaffirming the support of euro area member states for economic and fiscal reform in Greece. Nonetheless, the rating outlook remains negative because of continued uncertainty over the medium-term economic and fiscal adjustment, as well as the continuing lack of clarity over the fiscal financing strategy.”

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