(Bloomberg) – The euro erased an earlier advance against the dollar as analysts warned any gains will prove fleeting. The market’s focus is increasingly switching from Greece to global monetary policy.
“In the last days, we often saw a pick-up in euro-dollar around the time European markets open, but so far the euro wasn’t able to hold these gains in the afternoon,” said Esther Reichelt, a currency strategist at Commerzbank AG in Frankfurt. Europe’s single currency was still stronger against all but two of its 16 most-traded peers as Greece confirmed it would make payments due to the European Central Bank (ECB) and International Monetary Fund (IMF).
Greek banks reopened Monday, three weeks after they were shuttered to prevent economic collapse. The euro’s initial gains were “driven by the relief that Greece is indeed able to pay the ECB today,” Commerzbank’s Reichelt said.
Last week, the euro dropped the most in about two months as investors focused on the probability of the Federal Reserve raising interest rates this year while the ECB continues to add currency depreciating stimulus. There were other reasons to suppose any gains in the single currency would be short-lived. Hedge funds and other large speculators boosted bets on a weaker euro to the most in a month, while increasing wagers the dollar would advance. Implied volatility in the euro-dollar rate rose for the first time in eight days.
Greece has given the order to repay 6.8 billion euros to creditors after last week’s tentative bailout deal, according to a Finance Ministry official, who asked not to be identified.
