Forexpros – The dollar strengthened against major currencies on Monday, as even though Greece is on the cusp of negotiating a restructuring deal with its private creditors, a formal announcement has yet to hit the wire.
Even when both parties do agree on restructuring terms, which appears increasingly likely, Europe will still not emerge from its debt crisis, which sobered the markets and sent investors snapping up dollar positions.
The dollar firmed against the euro in early Asian trading on Monday, with EUR/USD falling 0.32% and trading at 1.3178.
Greece has spent weeks in talks with private creditors in attempt to hammer out terms needed to restructure the country’s debts.
While both sides haven’t formally announced a deal yet, market sentiment is rising that a deal is closer than ever.
Greece must come to an agreement with private lenders to secure the next tranche of bailout funds to prevent a sovereign debt default, as the country does not have enough money to cover a EUR14.5 billion bond repayment due March 20.
However, once the deal closes, much remains to bring the European economy out of the debt crisis, as the Greek accord is just one step needed to prevent the country from defaulting.
“Even with a resolution, the bottom line is that there’s going to be tough medicine having to be swallowed by Europe,” said Gavin Stacey, chief interest-rate strategist at Barclays Capital in Sydney, according to Bloomberg.
“There is a greater risk of a pullback in euro strength.”
Fitch Ratings on Friday cut credit ratings of Italy, Spain and three other euro-area countries, citing a lack of financial wherewithal to combat the crisis.
Meanwhile, the dollar was up against the pound, with Cable sliding 0.09% to hit 1.5714.
The greenback was up 0.04% against the yen, with USD/JPY trading at 76.73, and up against the Swiss franc, with USD/CHF gaining 0.27% to trade 0.9150.
The greenback was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.18% at 1.0035, AUD/USD down 0.62% at 1.0592 and NZD/USD down 0.52% at 0.8204.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.27% at 79.16.
Markets will play close attention to an E.U. economic summit in Brussels Monday.
Market watchers will also monitor preliminary data on German consumer price inflation.
The U.S. is to publish government data on personal consumption expenditure, a leading indicator of inflation, followed by data on personal spending, the motor of the U.S. economy.