The euro jumped against the dollar and yen immediately after reports that a 130 billion euro bailout for Greece has been approved by euro zone finance ministers. Greece will receive 130 billion euros from its European partners and the International Monetary Fund. The funds are just in time, as Greece was heading towards a disorderly default, as it faces a 14.5 billion bond redemption on March 20.
After months of uncertainty, the Eurogroup meeting in Brussels finalized measures into the early hours on Tuesday in Brussels and signed off on a plan to cut Greece’s debt to 120.5 percent of gross domestic product by 2020 from around 160 percent in 2011. Private bondholders accepted bigger losses to help plug the funding gap.
This would be the second rescue package for Greece and is provided until 2014. The first bailout was disbursed in May 2010 when Greece received 110 billion euros.
EURUSD initially dipped in Asian trading due to lack of any news on the bailout. Once the news was out that the deal was finalized, the pair surged to 1.3292. Meanwhile, EURJPY jumped to a three-month high of 105.95. EURGBP hit 0.8382 from 0.8339.
However, the rally in the euro is unlikely to be sustained for long as the deal itself is not a surprise and most markets already priced it in.
GBPUSD opened in Asia at 1.5845 and dipped to 1.5807 before surging on the Greek news to 1.5859.
The Australian dollar weakened against most of its major counterparts after the Reserve Bank of Australia said in its policy meeting minutes of its February 7 meeting that there is scope to ease monetary policy. In the last meeting the central bank kept interest rates unchanged at 4.25 percent but after today’s comments there is speculation for a rate cut. AUDUSD opened in Asia at 1.0753 and fell to a low of 1.0678 before bouncing back up to 1.0748 on the Greek bailout news.
USDJPY was little changed, hovering near six-month highs, as risk on shifted demand away from the safe haven yen. USJPY traded around 79.79.