News from AAP

Aussie dollar declines after Sarkozy threatens Greece

Print This Post A A A

The Australian dollar has fallen one US cent in morning trade after Greece was warned to make a clear decision on accepting financial help and stay in the eurozone.

At 1200 AEDT on Thursday, the Australian dollar was trading at 102.37 US cents, down from 103.64 cents on Wednesday.

Since 0700 AEDT on Thursday, the local unit traded between 102.15 US cents and 103.48 cents.

On Thursday morning Australian time, Greek Prime Minister George Papandreou met with German Chancellor Angela Merkel and French President Nicolas Sarkozy after the Greek leader shocked the world by announcing a referendum on accepting the eurozone bailout package.

After the meeting Mr Sarkozy said Greece must decide if it wants to abide by the terms of a bailout deal and stay in the eurozone.

He said the Europeans and the International Monetary Fund can’t release the sixth tranche of loans to Greece until Greece endorses the package of October 27.

Easy Forex currency dealer Tony Darvall said the warning to Greece has put negativity back into the market.

“We have seen some pretty heavy selling in all the risk assets, the US (equities) futures and the Aussie stockmarket when it opened,” Mr Darvall said.

“The market is not happy about the brinkmanship and the possibility of Greece leaving the Eurozone.”

Mr Darvall said the comments from Europe overshadowed the moderately good Australian retail sales figures released on Thursday morning.

Retail spending was up for the third month in a row, posting a 0.4 per cent rise in September.

Mr Darvall said the main focus for markets will be on developments from Greece, as well as the weekend’s G20 summit and the European Central Bank (ECB) interest rate decision on Thursday night, Australian time.

“You may see steps to stabilise the eurozone coming out of the ECB meeting, you may see a rate cut, you may see more aggressive bond buying,” Mr Darvall said.

Meanwhile, Australian bond prices were higher at noon.

At 1200 AEDT on Thursday, the December 10-year bond futures contract was trading at 95.740 (implying a yield of 4.260 per cent), up from 95.715 (4.285 per cent) on Wednesday.

The December three-year bond futures contract was at 96.380 (3.620 per cent), up from 96.340 (3.660 per cent).