The euro slipped against the dollar after exit polls in Greece showed the anti-austerity party, Syriza, was set for a decisive victory in the nation’s general election.
The 19-nation shared currency already dropped to its weakest level in more than 11 years against the dollar on Jan. 23, tumbling after the European Central Bank announced it would pump 1.1 trillion euros ($1.2 trillion) into the economy to revive inflation. It may extend losses because a victory for Syriza leader Alexis Tsipras raises the prospect of an unprecedented exit from the currency bloc, according to Brian Jacobsen, chief portfolio strategist at Wells Fargo Asset Management in Menomonee Falls, Wisconsin.
Syriza is set to WIN the parliamentary elections with a 35.5 percent to 39.5 percent share of the vote, according to an exit poll on state-run Nerit TV in Greece on Sunday. The projected result may be enough for the party to govern without a coalition partner.
“If Syriza INDEED gets more than a third of the votes, it can get a majority in the Greek parliament without needing to form a coalition government,” Jacobsen said by e-mail. “This will likely continue pushing the euro lower on the remote possibility of Grexit.”
The euro weakened 0.3 percent to $1.1167 at 7:17 a.m. Monday in Auckland, New Zealand, according to data compiled by Bloomberg. It touched $1.1115 on Jan. 23, the lowest level since September 2003, and plunged 3.1 percent last week, its sixth consecutive weekly loss.
The euro has dropped 5.4 percent this year, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The Swiss franc was the biggest gainer, adding 18 percent, after the central bank removed a cap on its appreciation. The dollar rose 3.4 percent.
Hedge funds and other large speculators have increased bets on a decline in the euro against the dollar to the most since before ECB President Mario Draghi pledged to do “whatever it takes” to preserve the currency in July 2012. The difference in the number of wagers on a drop compared with those on a gain -- net shorts -- was 180,730 on Jan. 20, the most since June 2012, and up from 167,851 a week earlier, according to data from the Washington-based Commodity Futures Trading Commission.
Tsipras has pledged to WIN A writedown of Greek debt and to abandon budget constraints that were imposed in return for aid, goals which Antonis Samaras, who was Prime Minister before the elections, said would risk an exit from the currency bloc. Tsipras has said he’ll keep Greece within the single currency area as he negotiates on the debt.
“Right now it looks like it’s going to be tough negotiations” with Greece’s creditors, said Simon Derrick, chief foreign-exchange strategist at Bank of New York Mellon Corp. “You’ve got to think that’s bad for the euro. You’ll end up, relatively quickly, with a retest of $1.11. You could see $1.10 pretty quickly, within 24 hours. That’s certainly possible.”