The EUR strengthened Friday on hopes that the complex negotiations over a new debt relief package for Greece were coming together ahead of a Monday meeting of euro-zone finance ministers. The common currency has rallied 4.2% against the dollar since touching its lowest level in more than 16 months in January.
Reports that the European Central Bank exchanged Greek bonds Friday to ensure that its holdings wouldn’t be subject to the same restructuring planned for private bond holders bolstered the currency. Though some investors complained that the special treatment for the ECB would discourage further investment in euro zone bonds by subordinating private sector creditors, most took the mere presence of a deal as a sign of progress in the long-stalled talks to resolve Greece’s debt problems.
The EUR has traded in a relatively narrow range in recent weeks as talks have dragged on between Greece, its public sector European creditors, and private bondholders over a EUR130 billion bailout needed for the country to avoid a default next month. After months of painstaking negotiations fraught with constant delays, investors remain cautious about next week’s meetings. Even if negotiators are able to achieve a deal, a stagnating European economy, coupled with the possibility of more debt talks in other peripheral European countries, may weigh on the euro in the coming weeks.
The USD had its second weekly gain against the JPY, climbing to its highest level since the Bank of Japan intervened in currency markets last October. Improving economic economic data in the U.S. and efforts by the Bank of Japan to stimulate its economy by increasing liquidity are both helping to support the USD.
The U.S. Conference Board reported Friday that its index of leading economic indicators in January increased for the fourth consecutive month, and the Labor Department said that consumer prices rose 0.2% last month, less than expected.
EasyForexNews Research Team