Euro fluctuates ahead of Greek vote

The euro fluctuated before Greek MPs vote on austerity measures needed to prevent the currency union's first sovereign default.

The currency erased a loss versus the dollar after European Central Bank president Jean-Claude Trichet said policy makers are in "strong vigilance mode," signalling they intend to raise interest rates next week.

Greek bonds rose the most in a week on speculation that politicians will approve a set of austerity measures tomorrow, moving the country closer to receiving additional funding from its international bailout.

Spanish and Portuguese 10-year debt also advanced, and Irish bonds rose across the board. By 3.48pm, the benchmark 10-year Irish bond yield was down to 11.88 per cent, while the yield on the two year bond was 13.9 per cent.

However, there is speculation that some of Greece's ruling Pasok party could vote against the package of budget cuts and asset sales.

"There are people inside and outside of the Pasok party that are against some or all of these measures but it's possible between now and then the current ruling government could gain itself more votes; anything is possible," said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. "I wouldn't take a position heading into this vote."

The euro rose 0.1 per cent to $1.4307 at 9.32am in New York, from $1.4287 yesterday. It was little changed at 115.64 yen. The dollar traded at 80.84 yen, compared with 80.89.

The Swiss franc reached a record high against the dollar, touching 83.04 centimes. The euro declined 0.3 per cent against the franc to 1.1899, from 1.1933 yesterday. It touched a record low of 1.1806 on June 24th.

The pound declined amid speculation the UK central bank will keep rates at a record low for longer than previously forecast.

The shared currency had earlier fallen as European Central Bank executive board member Juergen Stark said he doesn't expect the international community to further finance Greece after July if the country doesn't implement its austerity plan.

"There is only this one plan A" for Greece, Mr Stark said adding that he doesn't doubt the will of the Greek parliament overall to implement the agreed savings plan.

Germany's biggest banks and insurers will meet with the finance ministry in Berlin tomorrow as they seek to reach an agreement on their contribution to a Greek aid package, according to two people with knowledge of the matter.

The shared currency snapped three days of declines yesterday amid speculation Greek creditors may be headed toward a so-called rollover agreement.

Under a French proposal, half the Greek debt held by banks and insurers maturing in the next three years would be swapped for new 30-year Greek bonds. The redemptions from another 20 per cent would be invested in a special purpose vehicle that would serve as collateral for the banks, two people familiar with the plan said.

"It's all just band-aid measures at the moment," said Matthew Brady, executive director for foreign exchange at JPMorgan Chase in Sydney. "I'm still firmly in the camp that the euro will go lower."

Bloomberg