Euro Gains After Greek Parliament Approves Austerity Measures for Bailout

By Candice Zachariahs and Kristine Aquino - Feb 13, 2012 7:44 AM GMT+0700

The euro strengthened after Greek Prime Minister Lucas Papademos won approval from parliament for austerity measures to secure a second package of aid from the European Union and International Monetary Fund.

The 17-nation currency rose against most major peers after Parliament Speaker Filippos Petsalnikos said in remarks carried on state-run Vouli TV that a total of 199 lawmakers voted in favor of the measure. The dollar slid versus 12 of its 16 most- traded counterparts before data tomorrow forecast to show U.S. retail sales rose in January by the most in four months. The yen fell against the greenback after a report showed Japan’s economy contracted last quarter by more than economists had predicted.

The Greek vote “takes some of the downside out of euro for the short-term,” said Sacha Tihanyi, Hong Kong-based senior currency strategist at Scotiabank, a unit of Bank of Nova Scotia. “It certainly was helpful and positive for the currency. It probably induced some short-covering.” A short position is a bet that an asset will decline in value.

The euro rose 0.4 percent to $1.3247 as of 9:07 a.m. in Tokyo from last week in New York. The common currency gained 0.5 percent to 102.92 yen. The yen fell 0.1 percent to 77.70 per dollar.

Greece’s Finance Minister Evangelos Venizelos told lawmakers before the vote to secure a 130 billion-euro ($172 billion) second aid package that “we must show that Greeks, when they are called on to choose between the bad and the worst, choose the bad to avoid the worst.”

U.S. Retail Sales

With only weeks remaining before the country faces a 14.5 billion-euro bond payment, George Papandreou and Antonis Samaras, the leaders of the two largest parliamentary parties, urged support for the bill. Lawmakers, with an eye on elections as early as April, bristled at measures such as a 22 percent reduction in the minimum wage, smaller pensions and immediate job cuts. Seventy-four lawmakers voted against the measure.

Greece was granted its first aid package of 110 billion euros in May 2010.

The euro has gained 0.6 percent over the past week, the third best performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen dropped 2 percent, the worst return, while the dollar has lost 0.3 percent over the same period.

The U.S. currency extended declines against its major peers before Commerce Department figures projected to show a 0.8 percent gain in retail receipts, following a 0.1 percent advance in December, according to the median forecast of 65 economists surveyed by Bloomberg News.

“Economists have underestimated the upside to the U.S. retail report,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “It’s probably likely to weaken the U.S. dollar.”

Japan’s economy contracted at an annual 2.3 percent pace in the three months ended Dec. 31, the Cabinet Office said today. The median forecast of economists surveyed by Bloomberg was for a 1.3 percent decline.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net