Greek move to hold elections hurts euro

[NEW YORK] Greece's move to hold new parliamentary elections sent the euro to a fresh multi-year low against the dollar on Monday, as worries spread of a possible poll victory by the leftist Syriza party.

The greenback was generally modestly stronger in otherwise lacklustre year-end trade, pushing to 120.66 yen and to $1.5517 per British pound.

The euro dropped to $1.2153, its lowest level since mid-2012, after the latest development in Greek politics unnerved the markets.

Greek Prime Minister Antonio Samaras called for a national vote provisionally on January 25 after lawmakers failed in a third attempt to choose a new president, leaving the government in turmoil.

The moves sparked concerns the far-left Syriza could win and roll back tough austerity measures required under the IMF-EU bailout of the country, in turn further weakening the eurozone economy.

"This is the worst-case scenario," Jan Techau, director of the Carnegie Europe think-tank based in Brussels, told AFP.

"The uncertainty is a stark reminder the crisis is not over." Holger Schmieding of Berenberg Bank said there was "a risk of around 30 per cent that Greece may descend into a new deep crisis." On the other hand, he added: "A tragedy for Greece would probably not turn into a systemic crisis for the eurozone as a whole." Even so, the euro's fall was restrained in markets geared down for the holidays.

"Markets are unlikely to return to full strength though until after the New Year's holiday which augurs lower trading volumes and potentially higher volatility," said Joe Manimbo of Western Union.

But Manimbo said the dollar had the potential of further gains this week if fresh readings on US consumer confidence and manufacturing this week come in strong.

"Results consistent with an economy on a healthier footing would help keep the dollar biased higher," he said.

AFP