Friday, 10 July 2015 18:09
LONDON: The euro rose across the board on Friday, jumping 2 percent against the yen, on optimism that Greece was making progress in its efforts to secure funding and stay in the single currency.
The yen and Swiss franc, currencies which tend to do well during turmoil in financial markets, both lost ground as demand for riskier assets picked after Chinese shares rebounded.
The euro climbed 2 percent against the yen to a one-week high of 136.77 and added 1 percent against the dollar to trade at $ 1.1185 as Athens sent a proposal for reforms to its creditors.
Eurogroup President Jeroen Dijsselbloem said on Friday euro zone finance ministers may make a “major decision” when they hold an emergency session on Saturday to weigh the Greek proposal. Many in the market were optimistic, although there was a degree of caution about holding large bets going into the weekend.
“If there is a deal struck at the weekend, the upside for the euro is limited given other things going on,” UBS currency strategist Geoffrey Yu said.
“But if something bad happens, we would see the euro give up some of its gains.” Among the limits on any euro gains, traders said, is the European Central Bank’s trillion-euro asset-buying programme.
“I am really not sure how far this Greek-inspired rally will last. Maybe we get to $ 1.14-1.15, but given liquidity is getting thinner as we move into the summer holidays, there is a risk of overshooting,” said Ian Gunner, portfolio manager at Altana Hard Currency Fund.
Also helping risk sentiment were signs that Chinese equities may have stabilised.
Shanghai shares rallied for the second straight day on Friday, helped by emergency steps from the government to halt their dive.
The yen retreated, allowing the greenback to rise above 122 yen from a seven-week low of 120.41 set mid-week.
“True, the yen is on the defensive. But it still has a long way to go before it reaches the 124 handle, where it was before, reflecting the still-cautious mood in the market,” Barclays chief Japan FX strategist in Tokyo, Shinichiro Kadota, said.
In addition to China and Greece, a speech by Federal Reserve Chair Janet Yellen on the US economic outlook – due at 1630 GMT – will be a major focal point.
Traders said any resolution to Greece’s debt crisis might give the Fed added confidence to start raising interest rates this year.
