Euro rebounds on Greek hopes; Canada dollar rises

By Steven C. Johnson

NEW YORK (BestGrowthStock) – The euro rebounded from a 9-1/2-month low against the dollar on Tuesday as investors awaited new plans to address Greece’s debt crisis and held out hope for some form of help from the European Union.

Earlier, the euro dropped as low as $1.3435, its lowest since May 2009, after Greece’s biggest public union called for a 24-hour strike on March 16 to protest expected austerity measures from Athens.

Analysts said news that the Greek cabinet would meet on Wednesday to make decisions about the economy helped lift the euro from its trough as the spread between 10-year Greek and German government bonds narrowed.

“They’re expected to announce austerity measures tomorrow, and with a record short position in the euro, some people are trying to get to the sidelines. It’s prudent trading,” said Michael Malpede, analyst at Easy Forex in Chicago.

“If there’s a credible plan, it increases the odds of help from the EU, but I don’t think that’s a foregone conclusion.”

The euro was last up 0.4 percent at $1.3606, near a session peak of $1.3617 and well off its $1.3435 session low. It was little changed at 120.75 yen while the dollar was down 0.4 percent at 88.73 yen.

According to the Commodity Futures Trading Commission, speculative bets against the euro hit a record high in the week to February 23.

Traders said the euro had become a bit oversold, helping it recover some losses. “People, though, I think, are generally looking for new levels to sell it,” said Marc Chandler, head of currency strategy at Brown Brothers Harriman in New York.

A Reuters poll on Tuesday showed economists expect Greece will probably fail to rebuild its finances convincingly this year and its crisis will likely continue through 2010.

Technical analysts said the next support level to be tested for the euro was $1.3405, the 61.8 percent retracement of the rally from the 2008 low of $1.2328 to 2009’s high at $1.5144.

CANADA DOLLAR RISES

The Canadian dollar rose to a session high against the U.S. dollar after the Bank of Canada left interest rates unchanged, as expected, but said economic growth had been slightly higher than the bank projected in the January report.

The greenback fell to session lows at C$1.0311, according to Reuters data, and last traded at C$1.0360, down 0.5 percent on the day.

The pound fell 0.2 percent to $1.4959 after worries over a potential hung Parliament in the UK after upcoming elections had knocked sterling to a 10-month low of $1.4781 on Monday.

The Australian dollar rose 0.2 percent to $0.9036, extending gains after the Reserve Bank of Australia hiked interest rates to 4 percent and flagged further increases.

Most Federal Reserve officials have said repeatedly that U.S. borrowing costs are likely to remain low for an extended period, but Kansas City Fed President Thomas Hoenig on Tuesday said the Fed — the U.S. central bank — should begin preparing the market for higher rates.

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(Additional reporting by Wanfeng Zhou; Editing by James Dalgleish)

Euro rebounds on Greek hopes; Canada dollar rises