Euro falls in wake of Greek voters rejecting austerity
Volatility expected in markets as Greek exit could show EU membership is reversible
The euro fell as Greek voters rejected austerity demands, fueling concern the indebted nation is on track to exit the currency union
The euro fell as Greek voters rejected austerity demands, fueling concern the indebted nation is on track to exit the currency union.
Australia’s dollar slipped to a six-year low and New Zealand’s currency retreated. The euro lost 1.1 percent to $1.0987 by 5:09 a.m. Sydney time, slipping 2 percent against the yen and 1 percent versus the pound.
The Aussie dropped as much as 0.7 percent to 74.72 US cents, the first time its broken 75 cents since 2009, while the kiwi weakened 0.6 percent, even with China stepping up efforts to arrest a stock-market selloff at the weekend.
With Greece looking certain to vote against austerity measures required to win another bailout package, according to results posted on the Interior Ministry’s website.
The results mean Greece exiting the currency union is now the base-case scenario, JPMorgan Chase and Co. said.
China suspended initial public offerings and brokerages pledged to buy shares in weekend measures aimed at halting the steepest plunge in equities since 1992.
“This is a big surprise, the market definitely expected it was going to be close,” Clem Miller, an investments strategist at Wilmington Trust, which manages $20 billion.
“We’re going to see a lot of volatility and it wouldn’t surprise me if the euro’s down 2 percent or more. Everything’s going to get hit with the exception of safe-haven bonds.”
Rates on benchmark US debt closed up three basis points when they last traded on July 2nd, at 2.38 percent. American markets resume Monday following a holiday Friday.
While Greece accounts for less than 2 percent of the euro zone’s output, an exit would set a precedent for other nations that membership is reversible. The country’s immediate fate lies with the European Central Bank, which may take its cues from European Union leaders as to whether it can keep emergency loans flowing to Greece without the prospect of a bailout package.
The Greek government’s decision to call a snap plebiscite on creditors’ demands spurred a deepening in the nation’s financial crisis, with capital controls imposed and the country unable to make a scheduled payment to the International Monetary Fund last week.
Finance Minister Yanis Varoufakis had said he would quit if the country voted to endorse the austerity plan.