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Updated Wednesday, June 22, 2011 11:41 pm TWN, AFP

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Euro climbs versus dollar on Greece optimism

LONDON, The euro climbed against the dollar on Tuesday on cautious optimism that the Greek government would push through austerity measures to pave the way for a second bailout loan, analysts said.

In London morning deals, the European single currency rose to US$1.4334 from US$1.4301 late in New York on Monday.

Against the Japanese unit, the dollar eased to 80.19 yen from 80.20 yen on Monday.

“Market sentiment has registered a cautious improvement overnight on hopes that a solution for Greek's debt crisis could be found,” said Rabobank analyst Jane Foley.

Europe gave Greece a two-week deadline on Monday to drive through painful new austerity measures in order to gain access to emergency funds needed to avert a default.

They did so to allow Prime Minister George Papandreou's government time to win a confidence vote called for Tuesday, and again mobilize a wafer-thin majority on June 28 to steer the austerity cuts into legislation.

“We remain at a critical juncture for Athens, yet the markets are acting like the worst of the pessimism is over,” said Forex.com analyst Kathleen Brooks, noting that the euro was firm against the dollar while stock markets were higher.

The stability of the euro has been thrown into doubt by the Greek debt crisis, as investors fear that a default by Athens would have huge repercussions throughout Europe's financial sector.

In a further blow to the eurozone, data published on Tuesday showed investor sentiment in Germany fell sharply in June because of worries about the debt crisis and a possible economic downturn in the United States.

The ZEW Indicator of Economic Sentiment for Europe's biggest economy fell by 12.1 points in June to stand at minus 9.0 points, far below the indicator's historical average of 26.3 points.

“Troubles in the eurozone as well as the feared economic downturn in the United States appear to be weighing heavily on the minds of financial market experts,” said Wolfgang Franz, head of the ZEW institute.

“Moreover, financial market experts are seeing more and more evidence that the boom of the German economy may weaken during the months to come,” he said in a statement.

The closely watched monthly index was based on a survey of 290 analysts and institutional investors.

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