The US dollar’s foreign exchange rate was firmer on Monday in Asian trading, as risk sentiment weakened slightly after Greece and its private creditors failed to reach a full agreement on a debt swap deal to avoid a default.
Euro finance ministers will meet in Brussels on Monday to discuss new budget rules, a financial firewall to protect indebted states and a Greek debt swap.
“The outcome of Greek debt swap talks will hold a key for the recent trend of risk-on trade to continue,” said Junichi Ishikawa, senior analyst at IG Markets Securities Co.
“The failure to reach an agreement would cloud prospects for a rescue financing for Greece by EU and IMF and raise concerns about a default,” he said.
Greece will face a E14.5 billion bond payment on March 20. Negotiations for a debt reduction deal between Greece and its private sector creditors are continuing despite a dispute over the level of interest to be paid on new Greek sovereign bonds that would be issued in exchange for retired ones.
A draft proposal will be presented Monday for examination by Eurozone finance ministers at their meeting in Brussels, and the Greek government hopes the final deal can be sealed by the end of the week, the official said.
He said the dispute, which centers on the average interest rate to be paid on newly issued Greek debt, is “part of the negotiation tactics” and that “none of the sides is willing to let the negotiations break down.”
A top Greek banker familiar with the negotiations said that discussions between the Greek government and the Institute of International Finance (IIF), which is representing the creditors, had resulted in an average rate of around 4%, but the International Monetary Fund and Germany insist the rate should not exceed 3.5%. Their concern is that if Greece is required to pay more than that, its debt load will not be sustainable in the medium or long term.
US Commodity Futures Trading Commission data, released Friday, for positions as per January 17, showed that speculators increased their net euro short to -165,030 contracts, a new record, beating the previous record of -155,195 set a week earlier.
The euro is at $1.2896 versus the US dollar following a $1.2869 to $1.2907 range so far and $1.2930 in late New York on Friday.