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Forex - EUR/USD hits session low as Greece optimism fades

Published 02/21/2012, 07:33 AM
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Investing.com - The euro erased gains against the U.S. dollar on Tuesday, falling to a session low as the initial optimism which greeted news that a second bailout for Greece had be agreed upon faded.

EUR/USD pulled back from 1.3293, the pair’s highest since February 9, to hit 1.3223 during European early afternoon trade, slipping 0.14%.

The pair was likely to find support at 1.3114, last Friday’s low and resistance at 1.3293, the session high.

The single currency was boosted earlier after euro zone finance ministers agreed the details of a new financial package for Greece, which will reduce the country’s debt to 120.5% of gross domestic product by 2020, while the rate of the original bailout loan is to be reduced.

Private-sector creditors also agreed to take a write-down on their bonds of 53.5%, more than the 50% write-down that had been conceded before the meeting, which is expected to cut Greece's debt by EUR107 billion.

But sentiment on the euro soured amid concern that a general election in Greece, which is expected to take place in April could result in problems implementing the terms of the package.

Meanwhile, a report on the sustainability of Greece’s debt by the Troika, which is composed of the European Union, European Central Bank and the International Monetary Fund, said that "additional debt relief" will be required in the future.

The euro also trimmed gains against the pound and the yen, with EUR/GBP up just 0.06%, trading at 0.8358 and EUR/JPY dipping 0.03% to hit 105.40.

Finance ministers from the euro zone were scheduled to continue talks in Brussels throughout the day on Tuesday.

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