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« Gold in Perspective | Main | OPTIONTRADER: 20% in 46 days, Risk and Leverage »

Strong Auction Demand in Greece, Euro Steadies, Dollar Weakens

USD Chart

Greece's auction of treasury bills drew stronger demand than at a previous sale, signaling renewed investor appetite at the government's first offering of debt since winning an aid package from the European Union.

BNN speaks with Jessica Hoversen, fixed income and foreign exchanges futures analyst, MF Global.

In a nutshell Jessica points to the on-going problems of both liquidity and solvency, along with an economy which is expected to continue to decline so Greece may have to go to the IMF eventually. Ireland, Italy and Spain have committed funds to the thirty billion support package, should Greece need to call on it.

It begs the question of just where do these other countries get the funds, they have a surplus of their own financial problems as it stands, the mind boggles.

Please click here to catch her opinions.

The following update is by Sophie Laubie (AFP) who reported the following:

The finance chief for the 16 euro countries, Luxembourg premier Jean-Claude Juncker, said on Tuesday he was "reassured" by market reaction to a 30-billion-euro backstop Greek bailout.

"We took the right decision on Sunday ... I am reassured by the reactions of markets since,"

Juncker told AFP in his Luxembourg offices.

He was referring to a firming of the euro against the dollar on Monday and a fall well below 7.0 percent for the interest rates that debt-stricken Greece must pay to borrow on bond markets.

Juncker, the formal head of the euro finance ministers grouping, will hear from his peers in Spain on Friday as they assess political progress on activating the plan, aimed at calming market fears of Greek default and preventing the euro currency from entering freefall against the dollar.

Dismissing fresh doubts surfacing among analysts over the scheme's readiness and scale, he said he was pleased that a Greek government auction of short-term loan notes on Tuesday had been "oversubscribed at acceptable rates."

Dangling a return of over more than 4.0 percent, Athens raised 1.56 billion euros (2.12 billion dollars) from short-term treasury bills compared to an initial target of 1.2 billion euros.

The loan drive resulted in a rate of 4.55 percent on the six-month bill, still more than three times that paid in January.

Juncker said Europe would have to "wait several days" to reach a "definitive" judgment on how the rescue plan, which would involve another 15 billion euros in loans this year from the International Monetary Fund subject to ongoing negotiations, had been received "in its entirety."

As we can see from the above chart the US Dollar has come off its highs since the development of the bail out strategy for Greece. Still to be finalized the perceived solidarity has helped the euro to stabilize against the dollar, but for how long. We'll be keeping an eye on the situation as it unfolds as a slight weakening in the dollar could be the trigger to send gold prices higher and ultimately challenge its old high.

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Reader Comments (1)

Greece and Spain won't pay back. This was a calculated Risk, and a Lesson for the Banking System. What is happening in Greece, is a very well orchestrated show, to get granted €110bn aid, to avert meltdown. A new deception compared with the old Trojan Horse. The only thing Germans can do is:
REPOSSESS 170 Leopard 2AEX Battle Tanks from Greece, and 190 Leopard 2A6E Battle Tanks from Spain.
U.S.A must REPOSSESS 170 F-16 Jet Fighters from Greece, … the rest is gone with the wind …forever …
Greece must stop paying lucrative pensions with borrowed money, reform the free health care system, and cut down, 4 times the military budged.
Greece’s problem is too much debt. Greece has a budget deficit of 12.7% of GDP – meaning that the country is spending 12.7% more than the value of one year’s economic output.
Greece is no different to a serial credit card borrower who can’t pay back his loans. But just like a serial credit card borrower, as long as Greece keeps relying on borrowed money to fund itself, the problem won’t go away. It will just get worse.
But don't worry; the ECB, the Fed or both will print the money.
And all of us will share the pain, with our hard-earned money.
Bad is never good until worse happens.

May 14, 2010 | Unregistered Commenterblue monkey

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