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Euro weakens as eurozone fails to agree Greek deal

22 november 2012, 14:19
0
©REUTERS
©REUTERS
The euro fell in Asian trade on Wednesday and shares eased after eurozone finance chiefs said they had failed to agree on a deal to unlock the latest batch of crucial bailout cash for Greece, AFP reports.

Ministers said in a statement at the end of talks that ended in the small hours that they would meet again next Monday "for further technical work on some elements of the package".

The news sent the euro diving from recent highs against the yen, while it also lost almost a US cent from its intra-day peak against the dollar.

In afternoon trade the single currency bought $1.2747 and 104.30 yen after hitting $1.2820 and 105.07 yen before the announcement from Brussels.

It had finished in New York Tuesday at $1.2818 and 104.70 yen.

The dollar, which had touched a seven-month high of 81.97 yen in the morning, bought 81.81 yen in the afternoon.

Traders were left disappointed as they had been buying the euro on expectations an agreement would be made in Brussels, while Jean-Claude Juncker, who presides over the Eurogroup has said there were "good chances of an agreement".

However, the meeting ended with a statement saying only that they "made progress in identifying a consistent package of credible initiatives aimed at making a further substantial contribution to the sustainability of Greek government debt".

"It was progress but we have to do a little bit more," International Monetary Fund (IMF) boss Christine Lagarde told reporters as she left the meeting.

The major sticking point had been whether to give Greece, which is in desperate need of the $40 billion handout, an extra two years to arrive at a point where it can raise its own funds.

Juncker had called for that option but Lagarde very publicly disagreed.

Asian markets were also hit by the news, having started the day in positive territory.

In afternoon trade Tokyo was up 0.34 percent -- well down from the midday highs above 1.0 percent -- while Hong Kong was 0.21 percent higher by the break, having climbed 0.9 percent earlier.

Elsewhere, Sydney was 0.34 percent lower, Shanghai had lost 0.36 percent and Seoul eased 0.38 percent.

Investors had been buoyed by confidence the United States will avoid a fiscal cliff of tax hikes and spending cuts and that Greece will get its bailout, while Tokyo's climb was fuelled by a weaker yen.

The yen had been under pressure after the Bank of Japan held off further monetary easing on Tuesday but signalled fresh action could be in the pipeline after saying the economy remained weak.

The currency has weakened since last week, when the man likely to become prime minister after next month's general election said he would push for unlimited loosening monetary policy by the central bank.

There was more gloom for the Japanese economy on Wednesday as finance ministry data showed October's trade deficit nearly doubled to 549 billion yen ($6.7 billion) from a year ago, coming on top of weakening factory output.

On Wall Street, the three main indexes all ended flat on weak corporate news.

However, there was support from the Commerce Department, which said home construction rose again in October following September's strong surge, a further sign of recovery in the crucial housing market.

Housing starts rose 3.6 percent from October, surprising analysts who had expected a fall after September's jump.

Oil prices also saw their earlier rises clipped back. New York's main contract, light sweet crude for delivery in January, rose two cents to $86.77 a barrel and Brent North Sea crude for January delivery added nine cents to $109.92.

Gold was at $1,722.40 at 0430 GMT compared with $1,733.45 late Tuesday.

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