Business World

Thursday 30 March 2017

Euro drops for first day in five

Greek bonds fall on debt concern

David Merritt

The euro snapped five days of gains against the dollar and Greece’s bonds tumbled on concern the European Union-led bailout for the nation isn’t enough to prevent the region’s debt crisis spreading.

The euro fell against 15 of its most-active counterparts, losing 0.6pc against the dollar at 10:15am in London.

The premium demanded by investors to hold Greek 10-year notes instead of benchmark German securities increased to more than 400 basis points for the first time since the EU announced support for the nation on April 11.

Futures on the Standard & Poor’s 500 Index slipped 0.2pc after the benchmark gauge yesterday posted its biggest gain in six weeks.

Investors are betting Greece won’t be able to avoid having to tap the €45bn rescue fund pledged by governments and the International Monetary Fund to avert a default.

The euro has fallen about 5pc against the dollar this year on concern Europe’s fiscal crisis will undermine the credibility of the 16-nation currency.

“The market is still very much in doubt about the success of the EU bailout plan and that’s putting the euro under pressure,” said Ulrich Leuchtmann, head of foreign-exchange strategy at Commerzbank AG in Frankfurt.

“It’s far from clear if the plan simply delays or solves Greece’s problems.”

Stocks fell in Europe, erasing earlier gains that were spurred by better-than-forecast economic growth in China.

The Stoxx Europe 600 Index slid 0.1pc from a 19-month high, while the MSCI Asia Pacific Index climbed 0.6pc.

Greek yield

The Athens Stock Exchange General Index lost 0.9pc and the yield on Greek two-year notes rose 27 basis points to 7.26pc.

The yield soared to 7.83pc on April 8, the highest since the euro’s debut in 1999, according to Bloomberg generic prices.

Finance ministers said on April 11 the EU will provide Greece with €30bn of three-year loans at an interest rate of about 5pc if the nation requests the cash.

The IMF would provide another €15bn. The agreement came after earlier pledges failed to convince investors that the government is able to narrow a budget deficit that is more than four times the EU’s limit.

Bloomberg

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