Euro steadies after drop, worries over Greece remain

By Anirban Nag

SYDNEY (BestGrowthStock) – The euro steadied on Friday after falling in the previous session, although it looked vulnerable to further losses on disappointment among investors with the lack of details from the European Union summit to help Greece.

Commodity-linked currencies like the Australian dollar and the Canadian dollar retained broad gains helped by a recovery in risk appetite. Stocks (.SPX: ) and commodities (.CRB: ) bounced, driven by hopes that China will not tighten monetary policy anytime soon and expectations at the margins that Greece will not be allowed to default.

Attention now turns to economic data, with fourth-quarter gross domestic product data for Germany, France, Italy and the euro zone due later in the day.. Traders say the euro can ill afford softer-than-expected data, especially at a time when uncertainty about whether Greece will have to be bailed out uppermost in the mind of many investors.

“Similar to the bank bailouts in 2008, the market will continue to speculate about the point when the EU step will in, at what point the Greece situation will worsen when EU members agree that financial stability is threatened,” said Matthew Strauss, senior currency analyst at RBC Capital.

“These uncertainties will likely dwell for weeks if not months, capping the euro’s upward potential.”

In early Asian trade, the euro was steady at $1.3686 from late New York levels on Thursday when it lost 0.3 percent. It fell to as low as $1.3596 on Thursday, not far from a 8-1/2-month low of around $1.3580 hit last week.

Traders are focused on option barriers around $1.3550 and $1.3500, which suggests the euro could fall near those levels. It has fallen more than 4 percent this year as concerns over the fiscal health of Greece and other peripheral euro zone economies such as Portugal and Spain intensified.

It found some support this week on hopes that a bailout package for Greece was in the works, but investors who expected a quick decision were far from impressed from Thursday’s EU summit.

The euro held steady on the yen at 122.79 yen, having lost 0.6 percent on Thursday while the dollar found some support against the yen. The dollar was at 89.74 yen, unchanged from late in New York on Thursday when it shed about 0.3 percent.

The dollar index (Read more about the global trade. ) (.DXY: ) was slightly lower at 80, with all eyes on U.S. retail sales data for January. Sales are expected to rise 0.5 percent (ex-autos)..

Meanwhile, the Australian dollar retained impressive overnight gains, holding above 89 U.S. cents. It has been boosted by renewed talk of an Australian rate hike next month and hopes that after a muted inflation reading in China, Asia’s economic powerhouse will not move to tighten monetary policy quickly.

The New Zealand dollar, however, pared gains, falling to $0.6977 from above 70 U.S. cents late in New York on Thursday after softer-than-expected retail sales data backed views that interest rates there will not rise before the middle of this year.

(Editing by Balazs Koranyi)

Euro steadies after drop, worries over Greece remain