Economic Calendar

Tuesday, February 9, 2010

Euro May Fall Below 120 Yen on Greek Labor Concern, Mizuho Says

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By Hiroko Komiya

Feb. 9 (Bloomberg) -- The euro may weaken below 120 yen for the first time in a year as labor unrest in Greece stifles government efforts to tackle the widening budget deficit, according to Mizuho Securities Co.

Greek teachers, hospital workers and tax collectors plan to strike for 24 hours tomorrow as 600,000 public workers oppose Prime Minister George Papandreou’s plan to freeze wages and reduce benefits. Private-sector employees will follow Feb. 24.

“Europe’s fiscal woes, led by Greece, are producing global uncertainty and the strikes will be a key in deciding whether things get any worse,” said Hideki Hayashi, a global economist at Mizuho Securities, a unit of Japan’s second-largest banking group. If these concerns spill over to countries such as Portugal and Spain, we may see “a weaker euro or a stronger yen,” he said.

Speculation Greece and other European nations will struggle to contain their deficits has pushed the euro down almost 10 percent from its January high versus the yen. The 16-nation currency dropped to an 11-month low of 120.71 yen on Feb. 5, before trading at 122.49 yen as of 3:01 p.m. in Tokyo.

“There are concerns the impact of strikes will expand as public workers join a private-sector walkout,” Tokyo-based Hayashi said. “We need to watch how the February 10 strike will end and how the government will respond before forecasting the outcome of a large-scale strike on February 24.”

The first target for the euro will be its recent low of 120.71 yen, Hayashi said. Should the currency weaken below 120 yen, it may drop to as low as 115 yen, he said.

To contact the reporter on this story: Hiroko Komiya in Tokyo at hkomiya1@bloomberg.net




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