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Mar 16
Market Highlights July 5, 2011: Standard & Poor's Rating Cut Threatens Greek, Euro corrected
Tuesday, 05 July 2011 06:23

The euro slid in trading Monday (4/7) triggered by Standard & Poor's statement on Greece's debt. Standard & Poor's yesterday said that if Greece accepted the French proposal to voluntarily change the way of raising funds by involving private sector, Greece's credit rating will be downgraded to "selective default" under the criteria of the rating agencies.

Standard & Poor's considers that the Greek bond rollover plan would be tantamount to default (default). Banking France, Greece's largest holder of debt securities, which have been proposed bonds maturing reinvested in new bonds with longer durations. This proposal is supported by Germany, holder of debt securities to the two largest Greek and European Central Bank (ECB).

Statement of Standard & Poor's is shaking the market fairly thin trading volume due to the Independence Day holiday commemorates U.S. and disperse the positive momentum established since the Euro zone finance ministers mensepakati bailout package worth 12 billion euros last week. 12 billion euro bailout is a continuation of the scheme first aid fund worth 110 billion, which until last March, a new 53 billion euros disbursed.

At the end of Monday's trading session, the euro was observed moving in the range of 1.4526 to the dollar, down nearly 0.3 percent from opening levels. The weakening of the euro, however, still constrained by expectations of rising interest rates on the ECB's monetary policy meeting agenda this week.

ECB President Jean-Claude Trichet has previously said that the ECB is wary of the threat of inflation by saying the phrase strong vigilance. The phrase is commonly known as an indication of the ECB's ability to raise interest rates even though the Euro Zone is still in the entanglement of the debt crisis.

The ECB is scheduled to announce its interest rate decision on Thursday (7 / 7) day after tomorrow.

The market itself is still somewhat more inclined to risky assets is higher. This can be seen from the continued weakening of the Swiss franc. Although thin, the dollar again able to record a gain of 0.8477 francs to close at the end of the session.

Other currencies tracked moves in a tight range versus the dollar. Yen closed lower in thin range of 80.76 per dollar. While the pound traded in the range of 1.6089 to the dollar, rose less than 0.1 percent from opening levels.

The Australian dollar, meanwhile, closed down about 0.4 percent at 1.0735 against the dollar ahead of central bank monetary policy meeting of Australia (RBA) today. Still expected RBA will keep interest rates at 4.75 percent level.

Australia's recent economic data indicates the easing inflationary pressures and growth retardation. Such conditions could force the RBA to maintain its interest rate for a period longer than originally expected.

RBA is scheduled to announce results of its interest rate meeting at 11:30 pm today.