The JPY and the USD fell this morning vs. higher-yielding ccys on speculation that wealthier European nations would rescue Greece financially if needed, reducing the perceived risk of debt defaults throughout Europe. The EUR rose against the USD for a second day as French President Nicolas Sarkozy said yesterday that the region’s nations are “ready” to help Greece. The JPY dropped against all 16 of 16 of its major counterparts, and the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments fell for a seventh-straight day.
The JPY fell 0.2$ to 123.29 per EUR as of 6a.m. in NY, and traded at 90.24 per USD from 90.28 in New York on Friday. The USD dropped 0.3% against the EUR to $1.3666 and 0.7% against the KRW to 1132.53
Futures traders decreased bets the EUR will decline against the USD, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a decline in the EUR compared with those on a gain -- so-called net shorts -- was 66,770 on March 2, compared with net shorts of 71,623 a week earlier. Greece’s debt crisis has divided opinion about the future of the EUR. Former Federal Reserve Chairman Paul Volcker said on March 6 that he was confident the euro would survive.
Dennis Gartman (editor of the Gartman letter), speaking in an interview with Bloomberg Radio, predicted that European monetary union won’t survive another two years. “As soon as one country defaults, that’s it. The cloth that is the EU is frayed.”
Greek Prime Minister George Papandreou meets U.S. Secretary of State Hillary Clinton in Washington today and President Barack Obama and Treasury Secretary Timothy F. Geithner tomorrow to discuss the nation’s financial crisis.
The EUR advanced to a two-week high against the JPY after Sarkozy made some of the strongest comments by a European Union leader to signal the bloc would bail out Greece. “I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” Sarkozy said yesterday in Paris after a meeting with Papandreou. “There can be no doubt in this regard. Papandreou’s government last week passed a further round of austerity measures and sold 5 billion euros ($6.8 billion) in government debt.
German Chancellor Angela Merkel said at a joint press conference with Papandreou on March 5 that Greece doesn’t need financial aid, as she turned her focus to restricting the use of derivatives to halt “speculators” from exploiting countries’ budget deficits.
