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FOREX-Euro slips after Greece approves bailout plan, dollar buoyed by Yellen

Published 16/07/2015, 03:01 pm
© Reuters.  FOREX-Euro slips after Greece approves bailout plan, dollar buoyed by Yellen
DXY
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* Dollar buoyed as Yellen stays on message about future Fed hike

* Euro touches six-week low versus the dollar

* Kiwi tumbles to 6-year lows after soft inflation data

By Masayuki Kitano and Lisa Twaronite

SINGAPORE/TOKYO, July 16 (Reuters) - The euro edged lower on Thursday after Greece's parliament approved the austerity plan demanded by its lenders, while the U.S. dollar firmed as the Federal Reserve chief did not waver from her views that a rate hike was on the cards this year.

The euro briefly ticked higher on the Greek news, but later sagged back down and touched a six-week low at $1.0912 at one point. The single currency last traded at $1.0930 EUR= , down 0.2 percent on the day.

The outcome in Athens clears the way for talks on a third bailout from European partners, but clouds the future of Greek Prime Minister Alexis Tsipras' government following a split in his party ranks. ID:nL5N0ZV0Y1

Worries about Greece exiting the euro zone waned after Athens agreed to a debt deal with its creditors earlier this week. That has helped shift the focus back to the outlook for yield differentials in different economies, giving support to the greenback.

"I think the factor for the euro is monetary policy divergence rather than Greece," said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

The euro will probably fall further versus the dollar in the near-term, going into the Fed's policy meeting on July 28-29, Murata said.

After range trading for the past few weeks, the euro was now looking bearish on technical charts, said Lee Jin Yang, macro research analyst for Aberdeen Asset Management in Singapore.

"There will be a decent headwind against the euro, with U.S. dollar strength gradually coming back into focus," he said. Lee added that the euro faces resistance at its 100-day moving average, which is now at around $1.1014.

Traders said the dollar was bolstered by testimony from Federal Reserve Chair Janet Yellen on Wednesday that gave market participants no reason to pare bets on a U.S. interest rate hike as soon as September.

Yellen's comments largely reiterated her statement last month that the Fed would stay on track to raise interest rates later this year if the U.S. economy expands as expected, and cited labour market improvement. ID:nL2N0ZV1C5

Against a basket of major currencies, the dollar hit a six-week high of 97.395 .DXY at one point. The dollar index last stood at 97.270, up 0.1 percent on the day.

Against the yen, the dollar held steady at 123.82 yen JPY= .

"In the session ahead, we have another day of testimony from Yellen - this time in front of the Senate - but she is unlikely to change her tune or wade into deeper waters after her first day," John Kicklighter, chief currency strategist at broker FXCM.

The New Zealand dollar tumbled to a six-year low after weaker-than-expected inflation data cemented expectations for a cut in interest rates as early as next week. ID:nL4N0ZV27P

The kiwi had been already under pressure after a closely watched auction showed global dairy prices tumbled to a 12-1/2 year low. ID:nL4N0ZV5H3

The kiwi slid to $0.6506 at one point, its lowest level since July 2009. It last traded at $0.6512 NZD=D3 , down 1.2 percent from late U.S. trade on Wednesday.

The Canadian dollar remained on the defensive and hovered near a six-year low set on Wednesday, after the Bank of Canada cut its interest rate for a second time this year.

It slashed its key rate by 25 basis points to 0.5 percent, saying an unexpected economic contraction added excess capacity and curbed inflation. ID:nL2N0ZV17Y

The Canadian dollar CAD=D4 was last at C$1.2928 to the greenback. The Canadian dollar had touched a low of C$1.2958 versus the U.S. dollar on Wednesday.

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