Sydney Morning Herald Euro Falls Against Swiss Franc as EU Works to Resolve Greece Debt Crisis

The euro fell to a record low against the Swiss franc on concern Greece’s sovereign debt problems are worsening and the government won’t agree on austerity measures.
Europe’s shared currency pared its loss against the dollar after European Union Economic and Monetary Commissioner Olli Rehn said Greece will be able to get funding from the EU and International Monetary Fund in July as long as it enacts budget cuts. The IMF backed Rehn in a statement. The yen strengthened against the dollar after a report showed an unexpected slowdown in Philadelphia area manufacturing.
“We’ve seen continued weakness here and abroad and continued pressure on Greece and neither of those things are good for risk,” said John McCarthy, director of currency trading at ING Groep NV in New York. “It’s another reason to sell euros.”
The euro weakened 1.2 percent to a record 1.19466 francs before trading at 1.20350 at 1:19 p.m. in New York. It fell 0.1 percent to $1.4161 and reached $1.4074, the weakest level since May 26. The shared currency slid 0.5 percent to 114.24 yen, after touching 113.50, the least since May 16.
The dollar declined 0.3 percent to 80.69 yen after falling as much as 0.6 percent.

Option View

Implied volatility for one-week euro-U.S. dollar options surged as much as 294 basis points to 16.81 percent, the highest level since November 2010. It rose 349 basis points yesterday, the most since May 2010. Implied volatility, which traders quote and use to set option prices, signals the expected pace of swings in the underlying currency.
The franc appreciated 0.4 percent against the dollar to 84.95 centimes and strengthened against all of its 16 most- traded counterparts. The central bank kept its main interest rate at 0.25 percent, an outcome predicted by all 26 economists in a Bloomberg survey.
The franc is the most overvalued it’s even been versus the euro, based on models, Thomas Stolper, chief currency strategist at Goldman Sachs Group Inc., said on a conference call.
Greek Prime Minister George Papandreou will reshuffle his cabinet and seek to win a confidence vote today after attempts to garner opposition support for an austerity plan failed.

Amid Riots

As riots broke out in Athens and the Greek government teetered, EU Commissioner Rehn said “close contact” with the IMF made him confident of an accord at a weekend crisis meeting to pay out 12 billion euros ($17 billion) in July as long as Greece enacts new budget cuts.
Greece’s immediate concern is to obtain 8.7 billion euros from Europe and 3.3 billion euros from the IMF in July, promised as part of last year’s precedent-setting aid package to stave off the euro area’s first default.
“Progress is being made in the discussions to ensure the full financing of the program, and we anticipate a positive outcome on this at the next Euro-group meeting,” Caroline Atkinson, a spokeswoman for the IMF, said in an e-mailed statement today.