WORLD FOREX: Euro Falls, Rises On Fluctuating Hopes For Greece

 As I load this this story is less than an hour old.

Nothing new - more of the same; lots of anxiety and uncertainty - an volatility on the market.

This, I guess would represent the “official view from within Wall Street - none too optimistic!

By Javier E. David

   

Wall Street Journal

NEW YORK -(Dow Jones)- Festering concerns about a Greek default made the euro a captive of nervous and headline-driven trade Tuesday, with the currency whipsawed on a rapidly changing outlook for whether Europe can find a way to prevent Greece's problems from spreading.

The debt crisis that has roiled the 17-nation currency bloc has shown no signs of abating, with yields on Greek 2-year debt soaring above 80%. Mounting fears of a contagion effect have created strains in the banking sector, corroded economic data and sent investors in a frantic search for safer assets.

The euro dipped below $1.36 for a second day, but rebounded modestly after news surfaced that Germany, France and Greece would hold a conference call to discuss the crisis Wednesday.

Meanwhile, Treasury Secretary Timothy Geithner was scheduled to attend a meeting in Europe amid reports that the U.S. was working behind the scenes to urge euro-zone officials to bring an end to the nearly two-year old crisis.

"All of this is very much speculation, because the indications are ... that coordination among policymakers in the euro zone and elsewhere is going to be very difficult to achieve," said Aroop Chatterjee, chief foreign exchange quantitative strategist at Barclays Capital in New York.

Traders are still very nervous about the prospect of a Greek default unundermining other troubled economies, including Italy's, as well as banks that hold sovereign debt. These investors remain "underwhelmed" by the perceived foot-dragging of European officials, Chatterjee said.

"Pressure on the euro is to the downside in the near-term," he added.

Late Tuesday, the euro was at $1.3678 from $1.3680 late Monday, according to EBS via CQG. The dollar was at Y76.93 from Y77.24, while the euro was at Y105.20 from Y105.55. The U.K. pound was at $1.5785 from $1.5862. The dollar was at CHF0.8801 from CHF0.8803.

The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 77.067 from about 77.578.

With speculation about a Greek default or ejection from the euro zone reaching a crescendo, German Chancellor Angela Merkel rebuked a junior coalition partner for fueling market speculation about Greece's fate.

On Monday, the single currency sank to its lowest level in nearly seven months against the dollar. In a measure of how eager investors are for any semblance of resolution to Europe's financial troubles, traders bid the euro up sharply on reports that China might invest in the sovereign debt of Italy, the euro zone's third largest economy and now at the locus of market anxiety about its debt levels.

But Tuesday, the Italian government denied that it had reached out to Beijing to invest in the country's bonds, adding that Chinese investment would only be dedicated to infrastructure projects.

"If [European officials] do something that alleviates the stresses and addresses this latest iteration of debt crisis, the euro would have a ways to recover," said Robert Lynch, a strategist at HSBC Securities. "But the market lacks conviction" that the euro zone can get ahead of its problems.

For that reason, the euro is now less than half a centime away from the 1.20 level the Swiss National Bank established as its beachhead against further strengthening of the franc. While analysts don't expect the euro to breach that level anytime soon, a worsening of Europe's debt problems could test the SNB's resolve as investors flock to the franc.