Euro Drops as Eurogroup Meeting Kicks Off

The euro slipped against a stronger dollar, falling over 1 percent after the European Central Bank decided to keep Greek banks propped up with emergency funds, but made it harder for them to access the funds.

The euro fell around 1.2 percent against the dollar at $1.0929, beyond a five-week low, after the ECB confirmed that is was maintaining the “liquidity assistance” to Greek banks at 89 billion euros. Meanwhile the dollar rallied to trade 0.85 percent against a basket of currencies to levels not seen since the start of June.

While the ECB keep the loan amount to Greek banks at the same level, it also tightened the terms of the liquidity on offer by adjusting the “haircut” on the collateral required

Currently banks have to use assets as collateral in return for liquidity from Greece’s central bank. Those assets are not accepted at their face value, but a haircut – the value of which is unknown — is applied to them. In return, Greek banks get liquidity from the Bank of Greece, which is provided by the ELA (emergency liquidity assistance).

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza