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Euro Hits 11-Year Low After Syriza Victory In Greece

Published 01/26/2015, 12:09 AM
Updated 03/05/2019, 07:15 AM

The euro has fallen sharply against the dollar after the anti-austerity Syriza party won the Greek general election.

The euro briefly fell as low as $1.1088 – the lowest level against the dollar in more than 11 years.

Traders says there is uncertainty about what happens next in Greece, as Syriza leader Alexis Tsipras has pledged to renegotiate Greece’s debts.

He has also vowed to reverse many of the austerity measures adopted by Greece in return for bailout deals.

“The troika for Greece is the thing of the past,” he said after the election result, referring to the country’s biggest international lenders – the European Union, International Monetary Fund (IMF) and European Central Bank (ECB).

Greece’s current bailout programme ends in February, and economists say a short term deal will be negotiated, but difficult talks lie ahead.

“There is a danger of a prolonged stand-off with the Troika as Syriza attempts to negotiate some form of official debt restructuring while not reneging on its promises to voters to cut taxes, raise government spending and increase the minimum wage,” said Jonathan Loynes, chief european economist at Capital Economics in a research note.

Further uncertainty

The euro last traded at $1.1169 in Asian trade, recovering some of its earlier losses.

“Until we actually know the exact stance new party in Greece will take on the debt, we’re going to see further uncertainty for the euro,” said Jason Hughes at trading firm CMC Markets.

Mr Hughes said $1.10 is a key level for the euro, if it breaks that then it could head to parity against the dollar.

“The worst case scenario is we see Greek exit from the euro and that something markets won’t respond to particularly well,” he said.

Euro pressure

The announcement of a new stimulus programme by the European Central Bank last week has weakened the euro.

Recent weak economic data has also hurt the currency and Ryan Huang, strategist at IG Markets said: “We can’t to rule out the macro economic landscape from getting worse and affecting sentiment.”

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