Euro Weakens After Greek Confidence Vote; Asian Stocks Climb

by
June 22, 2011

By Shiyin Chen and Nikolaj Gammeltoft, Bloomberg

The euro slid from a one-week high against the dollar on concern Greek Prime Minister George Papandreou will fail to pass austerity measures even after winning a confidence vote in parliament. Asian stocks rose for a second day, while oil declined.

Europe’s shared currency weakened 0.3 percent to $1.4372 as of 9:38 a.m. in Tokyo after appreciating to $1.4434, the strongest level since June 15. The MSCI Asia Pacific Index climbed 0.6 percent, extending yesterday’s 1.4 percent rally. S&P 500 futures expiring in September added less than 0.1 percent, following a 1.3 percent jump in the U.S. stocks gauge yesterday. Oil decreased 0.4 percent in New York.

While Papandreou won a vote of confidence from 155 out of 300 lawmakers, he needs parliamentary approval next week for a 78 billion-euro ($112 billion) package of budget cuts to stave off default. European finance ministers said this week that they would hold off a 12 billion-euro payment promised for July until plans to cut the deficit, sell state assets and impose a levy on wages is passed.

“This vote buys Papandreou a week,” said Daniel Genter, who oversees about $3.8 billion as president of Los Angeles- based RNC Genter Capital Management. “But they’ve got to pass an austerity package within the next 30 days. There’s just not enough confidence right now that they’re going to get it through.”

Protests, Summit

The euro declined against 14 of its 16 most-actively traded counterparts and slipped 0.2 percent to 115.37 yen. After the vote, police used tear gas to disperse crowds protesting Papandreou’s budget cuts. The premier will now meet his counterparts at a summit in Brussels starting tomorrow that will discuss a new financing package to shield Greece from record borrowing costs for as many as three years.

“The prime minister survived and that’s a good sign because you have a functioning government, but they still need to pass legislation for the austerity measures,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. “The euro had priced in a lot of the good news and so it’s come off a bit and will likely fall a little further.”

 

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