Euro flat against dollar with Greek realities weighing

The euro traded flat versus the dollar yesterday, after almost hitting a two-week high earlier, as investors turned their focus to the obstacles to implement a Greek bailout package and the implications it will have on the eurozone economy.

Reuters reported that eurozone finance ministers reached a deal on a 130bn euro bailout for Greece to avoid a chaotic default in March after forcing Athens to agree to make bondholders take bigger losses and introducing unpopular spending cuts.

The deal, which the market had already largely factored in, essentially bought eurozone officials time to put the region’s new crisis measures in place over the months ahead. However, it also means Greece is unlikely to have any economic growth for years.

The Royal Bank of Scotland’s global head of strategy Bob Sinche said that A Greek plan has finally been put in place, but pointed out that implementation risks remain high. He said that investors will now have to battle with a Greek recession as well as the European Central Bank’s expansion to its balance sheet, with the latest round of the bank’s three-year refinancing operations to be published next week. Both are seen as negatives for the single currency.

The euro reached $1.32930, a session high and its highest since 9 February, on trading platform EBS after the successful overnight discussions on Greece, but then lost momentum. It remained flat at $1.32420 in late afternoon trading, with short-term support at Tuesday’s low of $1.32860.