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Euro supported by hopes for Greek deal

Written by Business World, on 18th Feb 2015. Posted in EU

article headlineThe euro held steady on Wednesday, finding some support as investors held on to hopes that Greece will find enough common ground with its euro zone partners and avoid a chaotic exit from the currency union. The euro traded at $1.1405, staying above this week's low of $1.13195 hit on Monday. Although Greece rejected a proposal to request a six-month extension of its international bailout on Monday, market players are betting that an agreement will be reached in the next couple of weeks. A source close to the government said Greece intends to ask on Wednesday for an extension of a loan agreement with the euro zone. The source drew a distinction between a loan agreement and the full bailout programme, which the new government insists is dead. Still, investors expect a compromise on the bailout programme will be reached as failure to do so could lead to a disorderly Greek exit from the currency bloc. Until the standoff over Greece's demands is resolved, markets will likely stay on edge, limiting any gains in the euro in the near term. "There remains uncertainty on whether the bailout programme will be extended," said Shin Kadota, chief FX strategist. Against the yen, the euro stood at 135.87 yen, down 0.1 percent on the day but well above Tuesday's low of 133.96 yen. The yen showed limited reaction when the Bank of Japan kept its monetary stimulus programme unchanged, as expected. The dollar last traded at 119.15 yen, down 0.1 percent on the day but little changed from levels seen ahead of the BOJ's policy decision. U.S. debt yields have surged in recent days, with 30-year bond and benchmark 10-year note yields climbing to seven-week peaks, on growing expectations the Fed could flag a possible rate increase as early as June in its next monetary policy statement. The prospect of a Fed rate hike by mid-year helped to push the dollar index to a 11-year high last month, and it has been consolidating since then. The dollar index last stood at 94.085, little changed from late U.S. levels and off its January peak of 95.481. (Reuters) For more visit: www.businesworld.ie

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