Euro gains vs dollar on Greek aid, German support

By Nick Olivari

NEW YORK (BestGrowthStock) – The euro recovered from one-year lows against the dollar on Friday as Greece sought to activate a financial aid package while Germany said it is ready to commit to a plan that will bail out the debt-strapped country.

Greece’s move to seek aid from the European Union and International Monetary Fund and the statement of support from Germany, which had initially been reluctant to make any commitment to support Greece, reassured investors that the troubled nation’s debt problems could be resolved soon.

Analysts, however, remained skeptical about the aid mechanism worth 45 billion euros ($60.49 billion) because it is not likely to solve Greece’s longer-term problems in tackling its budget deficit. Most traders said the euro would have difficulty getting above $1.34 against the dollar.

“The German comments did lift sentiment on the euro and Greek assets, but I don’t think this is going to do much for Greece in the long term.” said Jacob Oubina, senior currency strategist at Forex.com in Bedminster, New Jersey.

The aid package “is like putting a Band-Aid on a broken leg at the end of the day. Greece has to really cut spending and reform the way its government balance sheet is structured,” he said

In late afternoon New York trading, the euro was up 0.6 percent against the dollar at $1.3372, after hitting a session high at $1.3400, according to Reuters data. Earlier, the euro sank to a near one-year low against the dollar of $1.3202, also according to Reuters data.

Richard Franulovich, senior currency strategist at Westpac in New York, said despite the euro’s rally on Friday, “there is still a tremendous amount of skepticism in the market about this aid package and people in general are still comfortable selling the euro on any bounce.”

The premium investors demand to buy Greek government bonds rather than euro zone benchmark Bunds, a gauge of perceived sovereign risk, was last around 567 basis points.

GREEK LOAN

Greece expects to receive the first tranche of funds under the EU/IMF aid package before May 19, Finance Minister George Papaconstantinou said on Friday.

Worries about Greece have stung demand for risky assets and boosted the dollar, considered a safe bet in uncertain times.

Against the yen, the dollar rose 0.7 percent to 94.03 yen after earlier hitting a two-week high at 94.32.

The greenback was boosted by U.S. data that underpinned confidence in the economic recovery, including a surge in new home sales in March and gains in new orders for long-lasting manufactured goods excluding transportation.

“These are some large numbers. We’re looking for something between 3.5 percent and 4 percent on first-quarter GDP due out next week,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York. “The market can go into the weekend comfortable that the U.S. recovery is still (in) full swing.”

Investing Research

(Additional reporting by Steven C. Johnson and Gertrude Chavez-Dreyfuss; Graphic by Scott Barber in London; Editing by Leslie Adler)

Euro gains vs dollar on Greek aid, German support