The euro initially fell to a new four day low against the dollar early in the US session as concerns grew over a Greek default and debt contagion spreading to the larger euro zone economies like Italy and Spain. As the conference call between Greece and the troika (EU-IMF and EC) got underway to judge whether Greece is eligible for its next aid tranche due next month, optimism grew that something would come out of the call, and this helped euro bounce off session lows of 1.3586 to climb as high as 1.3719. By the end of the call, Greece’s Finance Ministry said the conference call was “productive and substantive,” and it is close to a deal with the troika. The conference call will resume again late on Tuesday.
Sterling hit a new eight-month low against the dollar in US trading, tracking losses in the euro which slumped as concerns over policymakers’ lack of progress on the euro zone debt crisis fuelled demand for the relative safe haven of the dollar. GBPUSD fell to 1.5629, its lowest since January 12 but soon rebounded as the EURUSD began to rise on hopes of a positive outcome of the conference call between Greece and the troika. This led cable to erase previous losses and was lifted to 1.5722.
The Canadian dollar weakened sharply against its US counterpart as the New York trading session go underway, due to a looming Greek default prompting investors to move away from risk such as commodity linked currencies like the loonie. Crude oil also tumbled which is Canada’s main export. USDCAD opened the US session at 0.9807 and soared to 0.9921 as the IMF-EU warned Greece that it must shrink its public sector and improve tax collection in order to be eligible to receive its next aid trance in October worth 8 billion euros or else run out of money and face default. However after the conclusion of the conference call between Greece and the EU-IMF, market sentiment picked up as Greece announced it was close to a deal. This helped the Canadian dollar make some gains, leading USDCAD pair to dip to 0.9881.
The yen rose to its strongest level in four weeks against the dollar as the Greece-EU-IMF conference call got underway. USDJPY tumbled to 76.31 from the session open of 76.71 as over where the euro zone crisis is heading, prompting investors to turn to safe haven assets like the Japanese yen. The USDJPY pair soon changed direction and pared losses upon the announcement by Athens that the conference call was productive. EURJPY rebounded from a session low of 103.95 to surge to 104.95.
Gold lost over $50 a troy ounce in New York to dip to $1,770.40 from the session open of $1,821.62. There was analyst concern that gold had risen too fast, too soon in the past two days and needs to correct more to bring back that real strong support for value buying. Also uncertainties over what a two-day policy meeting of the Federal Reserve from Tuesday would yield has also put gold in a wait-and-see mode.