$A falls despite Greek agreement

Caroline Smith

The Australian dollar fell yesterday despite news European finance leaders have reached a deal on Greece's next round of bailout funds.

At 5pm last night, the local unit was trading at $US1.0738, down from $US1.0777 on Monday.

From 7am yesterday, the local unit traded between $US1.0680 and $US1.0747.

The bailout deal, which will secure €130 billion ($160 billion) for Greece, was announced after a gruelling session of talks in the European Union's Brussels headquarters about the attached austerity package.

These measures aim to cut the Greece government’s debt to 120.5 per cent of its gross domestic product by 2020, while the bailout funds will allow the country to avoid defaulting on its debt next month.

Commonwealth Bank currency strategist Joseph Capurso said the market had already priced in the Greek resolution. “The market kind of expected it – the euro’s climbed a little bit, but only by about half a cent or so,” he said.

“We might see a bit of a pick-up in the Aussie dollar and euro once the London trading session starts, but I don't think the Australian dollar will reach $US1.08 .

“However, if equity markets start to grow strongly, then we might start to see the Aussie push up.”

Mr Capurso said that, despite a deal being cut, there was still much to be resolved for Greece to stabilise.

The local currency moved little after the release of minutes from the Reserve Bank of Australia's February meeting, when the central bank elected to keep the cash rate on hold.

The minutes pointed to a more positive global sentiment as reasons for the hold decision but did not give a clear indication for future rate movements.

“They cut in a large part late last year because the situation overseas was deteriorating rapidly, but it has stabilised,” Mr Capurso said. “I think if the situation stays where it is, then they probably won’t cut again.”

Mr Capurso said that in the absence of any data expected overnight, traders would be watching for the equity market and US market's reaction to the Greek deal.

"The US market could also open with a bang after [Monday’s US public] holiday, so the Aussie dollar might get a leg up when New York opens," he said.

At 1700 AEDT, the Australian dollar was at 85.63 Japanese yen, down from Monday's 85.64 yen, and at 80.89 euro cents, down from 81.54 euro cents.

Australian bond prices rose after the news from Europe.

Commonwealth Bank interest rate strategist Phillip Brown said the Australian market's reaction to the news about Greece had been fairly muted. Australian bond future prices had fallen slightly but remained above their close on Monday.

AAP

AAP