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Dollar Treading Water

The greenback holds near Monday's closing levels as market exuberance for the Greek bailout fades.

By Omer Esiner of Travelex

The dollar finds itself treading water near yesterday's closing levels on the euro this morning as the market's exuberance for the Greek bailout fades.

The single currency rallied sharply into the open yesterday as markets were soothed by the announcement that the region's finance ministers had agreed to terms of a rescue.

The details of those terms, however have taken the wind out of the euro's sail this morning. Despite a successful, albeit relatively small, auction of short-term Greek debt in Europe this morning, the terms of the larger bailout are giving many pause and forcing many to reconsider their initial enthusiasm as the bailout does not address the longer-term, structural deficiencies in Greece.

Reports that


, the American bond behemoth would not be interested in purchasing any sovereign Greek debt undermined the single currency as well.

The pound fell against the greenback, though vaulted higher vs. the euro as a mixed bag of data out of the U.K. showed a narrower-than-expected trade gap on the back of scorching consumer activity.

However, when the dust settled much of the consumer activity was attributable to the Easter holiday and was not seen as a harbinger for long-term progress. Simultaneous data also showed a cooling housing sector in the U.K.

News that a group of junior Japanese ruling party lawmakers were calling for a significantly weaker yen failed to provide any lasting support for the buck, which picks up more or less where it left off yesterday against the yen.

The antipodean currencies of Australia and New Zealand succumbed to the risk-reduction mindset and tumbled from their peaks hit yesterday. Trade balance figures from both sides of the U.S./Canada border highlight the data menu today, though developments out of the eurozone will continue to dominate the radar screens of market participants.


: U.S. February Trade Balance, forecast to widen to $38.5 billion from January's $37.29 billion, was $39.70 billion, wider than forecast. The buck is off slightly on the news.

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: The Greek saga continues to unfold Tuesday with more details emerging regarding the terms of the austerity package cobbled together by the eurozone finance ministers and IMF over the weekend as well as concerns about the long-term viability of the proposed measures.

Tuesday also saw a relatively successful auction of short-term sovereign Greek debt. The sale of 1.56 billion six- and 12-month euro notes, however, could be seen as a bad indication of the market's appetite for risk with respect to Greece, because the primary concerns surround Athens' long-term ability to refinance maturing debt and service other existing debt beyond 2011.

PIMCO's CEO raised another obstacle ahead of May's U.S. road show by Greek finance officials by pointing out that the rate the Greeks would be charged (5%) on the rescue funds, should they tap into them, would not be significantly below what the Greeks are currently paying now in the open market (around 7.5%).

He also raised concerns over the seniority and subordination of the debt as the reason PIMCO would refrain from participating in any financing of the Greek government's debt and reminded markets that access to the funds still requires full agreement from all EU members, which may be easier said than done.


: The pound fell this morning after mixed data showed a narrower-than-expected trade gap in February. The deficit narrowed from 8 billion pounds in January to 6.2 billion pounds in February.

Forecasts were for a decline to 7.35 billion pounds. The consumer spending component of that figure, also highlighted by a report from the British Retail Consortium, accounted for nearly half of that improvement and is seen as a temporary boost attributable to the Easter holiday. That coupled with a cooler-than-expected private sector housing report and government data showing a 0.1% decline in the price of houses knocked the pound down a peg.


: Canada's February Trade surplus was $1.4 billion Canadian dollars, which was wider than the forecast for a narrowing to $700 million Canadian dollars. The loonie fell slightly on the release of the data.

Omer Esiner serves as the Senior Currency Market Analyst at Travelex, Inc. a global financial institution specializing in corporate foreign exchange services and international payment solutions. In this capacity, he monitors, analyzes and interprets the economic, financial, political and technical factors that drive the movements of more than 100 currencies for Travelex. Mr. Esiner explains the currency markets' reaction to market events to clients, employees and members of the media.

You can view his daily reports, recording briefings, and quarterly reviews posted


. As an expert in foreign exchange, Mr. Esiner is quoted regularly by the financial media including The Wall Street Journal, CNN, Dow Jones Newswires, Reuters, the Nightly Business Report, National Public Radio, among others. Based in Washington, D.C., Esiner joined Travelex in February 2000. Prior to his current position, Esiner was a currency trader for several years. Mr. Esiner holds a bachelor's degree in economics from the University of Maryland, College Park. He is fluent in Turkish and proficient in Spanish.