Euro Weaker But Clawing Back Losses Following Greek Referendum

 
   By Hiroyuki Kachi 
 

        The euro remained weaker but recouped some of its earlier losses against the dollar and the yen after the initial jittery reaction to Greek's overwhelming rejection of creditors' demands in a referendum Sunday.
        Around 0450 GMT, the common currency had bounced back to $1.1030 after briefly falling to $1.0952 earlier in Asia trading hours. Those levels compared with $1.1107 late Friday in New York.
        Against the yen, the euro also weakened to Y134.93 midday from Y136.18 Friday, but much higher than a low of Y133.60 earlier in the session.
        Greeks voted against their international creditors' conditions for further bailout aid, in a result that could deepen the rift between Greece and the rest of Europe, and push the country closer to bankruptcy and an exit from the euro.
        After the initial reaction to the news sent the euro into tailspin, dip buying kicked in from investors ranging from overseas hedge funds to Japanese retail investors, market participants said.
        "After falling on the surprise, investors gradually regained a sense of calm," said Mizuho Securities FX strategist Kenji Yoshii, in explaining the euro's recovery from its earlier lows amid the mood of risk aversion. Comments from Japanese government officials were also helping prop up market sentiment, Mr. Yoshii said.
        Japan's top government spokesman played down the effect of the Greek referendum on the Japanese economy, calling the reaction of the stock and FX markets "limited and within expectations." Japan's Chief Cabinet Secretary Yoshihide Suga also said that direct Japan-Greece economic and financial ties were "extremely limited."
        Japan's finance minister Taro Aso issued a special statement Monday aimed at calming nervous markets, saying Tokyo was "fully prepared" to handle possible repercussions from Greek voters' emerging rejection of bailout terms.
        Bank of Japan Gov. Haruhiko Kuroda also issued a statement aimed at soothing market concerns. "The BOJ will continue to watch financial markets carefully while keeping close contact with relevant organizations at home and overseas," he said.
        "Still, we can't say things are turning for the better so investors are likely to keep their jittery eyes on the stock market reaction and comments from authorities," said Yuji Saito, executive director of the foreign exchange department at Credit Agricole in Tokyo.
        Mr. Saito said another round of flight to safer currencies was possible during European trading hours, when more information may emerge on the timing of talks between Greece and its creditors.
        Investors generally regard the Japanese currency as a safe-haven asset that retains its value during periods of geopolitical or financial instability. They buy the Japanese currency when uncertainty heightens.
        With investors buying into the perceived safety of the yen, the greenback was down against the yen, changing hands at Y122.33 midday, compared with Y122.77 Friday. But the greenback was higher than its low of Y121.70 earlier in the session.
        Putting aside the Greece-related headlines, investors were closely watching how Asia stocks would react to China's weekend decision to suspend initial public offerings and launch a market-stabilization fund, in an attempt to help arrest the stock slide there. While the benchmark Shanghai Composite Index jumped around 7.8% at the open, it had given back those gains in the afternoon session.
        The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was up 0.25% at 87.37.
        Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
        (END) Dow Jones Newswires

        July 06, 2015 01:41 ET (05:41 GMT)

#FX
#Forex
#SaleForex
#EuroWeaker
#ClawingBack
#LossesFollowing
#GreekReferendum