Kiwi Higher In Early Trading On Yields; Euro Drifts As PSI Back In Focus

By David Liu,

Weekend Developments
  • Greek sovereigns downgraded by Moody’s to Ca, by S&P to CCC
  • Ratings agencies warn that a restructuring may be increasingly likely, Greece may ask for third bailout
  • PSI negotiations will continue this month
  • Ratings agencies sees possible haircut of 70-80%

Risk appetite this morning was relatively mixed this morning in early trading as markets weighed additional carry flows with possible continued sovereign debt troubles in Greece, Portugal and Italy. After last week’s EUR 529.5 billion in 3 year loans to the Eurozone’s commercial banks, the focus is expected to return this week to ongoing private sector negotiations with Greece and various holders of Greek debt. Reports state that current PSI negotiations continue to be around the total amount of conversion from old debts to new debts, while the yield on newly issued Greek bonds are to have been agreed on.

While ratings agencies Moody’s and S&P downgraded Greek debt again last week to record lowest levels, citing that complete negotiations by March 8 th of this month were a prerequisite for Greece’s second bailout in time for its March 20 th maturity deadline, negotiations are expected to continue into the rest of the month. Further warnings from the German Finance Ministry and ECB that the amount of participation may not be as high as expected could continue to pressure the Euro lower.

At the time of writing, commodity currencies led gainers against the Greenback, while the Euro is the weakest performer among the majors.

--By David Liu, DailyFX Research
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