Monday, June 18 16:42:32
The euro fell from a one-month high against the dollar today after four days of gains, as an election win for pro-bailout parties in Greece failed to ease worries about Spain's debt problems after borrowing costs surged to unsustainable levels.
While the election result appeased immediate concerns about Greece being forced out of the euro zone, uncertainty persisted as the winning New Democracy party must now try to put together a government with other parties backing the international bailout, which is not an easy task to do.
Antonis Samaras, the New Democracy leader, on Monday, said the country needed as broad a coalition government as possible, after radical leftist refused to join. Market players also fretted about the euro zone's ability to respond to the risk of contagion to other larger economies like Spain and Italy, with investors likely selling into any near-term bounce by the euro.
"The win in Greece does not really resolve anything. It's still going to be tough for Greece," said Boris Schlossberg, managing director at investment advisory firm BK Asset Management in New York.
"And with Spanish and Italian yields at high levels, the credit market remained sceptical that Europe is going to get out of the debt crisis." Ten-year Spanish government bond yields, hit by persistent concern about the country's fiscal and banking problems, rose above the 7 percent line seen as unsustainable in the long-term and at a level that forced other peripheral euro zone nations to seek bailouts.
The euro was down 0.3 percent on the day at $1.2602, off a one-month high of $1.2747 struck in the Asian session, as it came under pressure on reported selling by Asian sovereign investors. This was the euro's worst showing in a week. It fell past reported stop-loss orders around $1.2660-70 to $1.2620 in the European session with support expected around the June 13 high of $1.2610.
The euro also failed to hold gains after a positive Greek outcome as the result had already been priced last week. Greek equities, for instance, had rallied 14.1 percent between Tuesday and Friday, while the euro rose from roughly $1.25 to $1.2650 in and the S and P 500 rallied 2.5 percent in the same period.