The U.S. Dollar gained against the majority of its peers as uncertainty over the fact Greece may still default, overshadowed the news that E.U. Finance Ministers agreed to grant Greece the second bailout. The Dollar’s gains were limited despite the fact that U.S. Stocks increased to the highest level since 2008 prior to retreating. The Canadian Dollar traded lower than the U.S. currency as doubts over whether Greece will be able to overcome its debt crisis weighed on risk appetite. The Loonie made little changes versus the greenback after reports showed that domestic retail sales fell 0.2 percent during the last month of 2011. But it was actually the hike of 0.9 percent in Canadian wholesale prices that offset the negative impact of the previous metrics. The Canadian Dollar capped its losses as crude oil remained at $104.91 a barrel.
The Euro rose against the majority of its counterparts after a meeting of key E.U. Finance Ministers concluded on a positive note with an agreement to grant Greece the 130 bn Euro aid package. In addition, private creditors agreed to a 53.5 percent writedown on their bonds, which according to some economists will reduce Greece’s debt by 107 bn Euros. But all the positive news still wasn’t able to set investors at ease who continue to worry that upcoming April elections in Greece will somehow interfere with the implementation of the new measures. The British Pound traded lower than the U.S. Dollar on concerns that the late bailout approval may not help Greece come out of its debt crisis. The Sterling slipped despite a release which indicated that the U.K.’s public finances sustained the biggest surplus since January of 2008. And in Switzerland, the trade surplus dipped to 1.55 billion CHF.
The Yen continued on what’s been called it longest losing streak in over two months, after investors sold the Japanese currency in exchange for high-risk assets. The currency has been depreciating since the Bank of Japan announced its plans to augment the asset-purchase fund to 30 trillion Yen. The U.S. currency traded higher against the Yen after the Euro-region’s Finance Ministers approved the Greek aid package, but the markets remained uncertain on whether this will be enough to prevent its default.
A release of the minutes from the last policy meeting held by the Reserve Bank of Australia revealed that the bank may yet implement further easing, especially if demand for raw materials declines and causes inflation to increase. This prompted the Aussie Dollar to depreciate. The South Pacific currencies erased earlier losses following the announcement that Greece had secured the second bailout.
EUR/USD- Greece Obtains Bailout
While Greece is secure it will receive the 130 bn Euro bailout, the markets remained anxious and continued to trade on headlines. This was evident when risk currencies declined in anticipation of the announcement and rebounded soon thereafter. Meanwhile, economists and analysts suspect a default may not be unlikely. Although the Euro traded higher than the commodity currencies, it traded mixed against the U.S. Dollar before appreciating against it.
GBP/USD- Pound Remains Low On Market Jitters
Given the concerns Greece may not overcome its debt crisis despite the bailout package, the Sterling remained low against the greenback. On the data front, reports showed that the U.K. experienced the biggest surplus in the public finance sector since 2008. Net borrowing reached a surplus of 10.7 billion Pounds in January after having shown a deficit in the previous month.
USD/JPY- Yen Extended Losses
The Yen extended losses while maintaining the longest losing streak in two months after investors decided to sell off the Yen for other high-risk currencies. The greenback rallied against the Yen on speculations Greece will not be able to stem its debt situation despite the approval of its next aid package. The Euro traded mixed against the Japanese currency while the markets remained uncertain about the debt crisis, and Spain had a positive bond auction wherein it sold 1.7 billion of three-month treasury bills. The Yen has remained under pressure since the start of the week when a release indicated the country posted the highest trade deficit, suggesting exports are being affected by the overvalued currency.
AUD/USD- Minutes Point To Easing
The Australian Dollar traded low against the U.S. currency as the announcement of an agreement on the Greek bailout failed to boost risk appetite in the markets. The currency dipped lower as the minutes for the Reserve Bank meeting suggested monetary easing may still be a possibility if the demand or commodities and raw materials should decline. The report also mentioned that although the Euro region has not managed to stem the debt crisis, the outcome may not be as bad as anticipated. The Aussie’s gains were capped on speculations the currency may already be overvalued.
Today’s calendar shows that the U.K. will release the Monetary Policy Meeting Minutes. The E.U. will report on French CPI, German Manufacturing PMI, and the region’s Manufacturing PMI as well as Industrial New Orders. The U.S. will issue data on Existing Home Sales and MBA Mortgage Applications.