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Wed 22 Jun 2011 09:49 AM

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Euro stabilises after Greek vote, Fed eyed

Greek government survives key confidence vote; attention turns to US Fed conference

Euro stabilises after Greek vote, Fed eyed
Euro currency

The euro stabilised on Wednesday and Asian shares rose after the Greek
government won a vote of confidence as expected, prompting investors to shift
focus to the US Federal Reserve's news conference due later in the day for
further cues.

The euro last traded at $1.4366 , extending its recovery from a three-week
low of $1.4073 it hit last Thursday, but below the high of $1.4435 it touched
after the vote in Athens, bringing the beleaguered country a step closer to a €12bn
aid package.

If Greece avoids defaulting on its sovereign debt, it could help renew
confidence in the single currency, though the head of the world's largest bond
fund Pimco said Greece's way out of its debt problem would be through default.

Next in line is the Fed meeting which began on Tuesday, against the backdrop
of a weakening US economy that will likely force policymakers to plan for the
possibility that things may get worse.

Chairman Ben Bernanke will address the media at 1815 GMT and is widely
expected to revise down the Fed's earlier quarterly forecasts for US GDP
growth.

This is unlikely to be good news for the dollar, Credit Agricole's head of
global FX strategy Mitul Kotecha said in a briefing note, "given that the
Fed is set to downgrade its growth forecasts, with the comments on the economy
likely to sound a little more downbeat given the loss of momentum recently as
reflected in a string of disappointing data releases."

The dollar index , which tracks the dollar against a basket of major
currencies, fell to a one-week low at 74.516, well off last week's peak of
76.015. It was last at 74.778.

Against the yen, the dollar was little changed at 80.25 , comfortably within
the prevailing 79.50-81.50 range.

Greece's vote outcome sheered Asian stock markets, especially Japan's Nikkei
which rose for the third day in a row, gaining 1.4 percent at 9595.26.

Financial services firms were among the big gainers, following rivals
elsewhere which rose on hopes that the vote will prove a step towards resolving
the European debt crisis, one of the most persistent worries for markets.

"The market is up on Greece, but it's a temporary rise on a news event.
We may see some more short-covering going into the afternoon, but that's about
it -- fundamentals haven't changed a notch," said Mitsushige Akino, chief
fund manager for Ichiyoshi Investment Management.

MSCI's index of Asia-Pacific stocks excluding Japan was up 0.7 percent,
while indices in Hong Kong and South Korea also rose.

Brent crude oil for delivery in August made a partial recovery to $111.30 a
barrel after falling more than 70 cents on Tuesday, largely on ongoing worries
about the euro zone.

Gold inched up to $1,546.65 per ounce by 0200 GMT, little changed from
Tuesday's close.

Gold, one of the chief beneficiaries of worries about the security of
currencies and other assets, set a record high of $1,575.79 per ounce in early
May. Copper was down slightly at $9,039 per tonne after rising almost 1 percent
in the previous session.

 

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