Forex - Euro hits session highs on Greece debt swap plans

The euro rose to almost two week highs against the broadly weaker dollar on Tuesday, boosted by hopes for a breakthrough between the new Greek government and its international creditors.

EUR/USD rallied 0.87% to 1.1439, the highest level since January 22.

Investor confidence was boosted after the Greek government outlined its plans to renegotiate the terms of its €140 billion bailout with its creditors, backing off from election pledges to demand a debt writedown.

The move eased concerns over a conflict which could lead to Greece’s exit from the euro zone.

Greek Finance Minister Yanis Varoufakis has proposed debt swaps to ease the country’s burden debt, under which creditors would swap outstanding debt for new growth-linked bonds. This could help to reduce the risk of losses on privately held bonds.

Athens also wants less oversight from the troika, which is made up of the European Union, the European Central Bank and the International Monetary Fund.

Three major Greek banks accessed emergency funding available from the ECB on Tuesday, amid a liquidity squeeze, with some depositors withdrawing money amid fears over political uncertainty.

Athens main stock index rallied Tuesday, supporting broader gains in European equality markets.

Meanwhile, the yield on Greek 10-year bonds was sharply lower.

Elsewhere, the euro strengthened against the yen, with EUR/JPY advancing 0.86% to 134.44, off overnight lows of 132.40.

The yen gained ground against the other major currencies earlier in the day, boosted by strong gains against the Australian dollar after the Reserve Bank of Australia unexpectedly cut interest rates to a record low 2.25% in a bid to spur slowing growth.

In other trade, USD/JPY was at 117.67, after falling to lows of 116.88 overnight.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.61% to 94.23, pressured lower by gains in the euro.

Dollar slips lower as sentiment improves amid Greece hopes

The dollar slipped lower against the other major currencies on Tuesday, as the previous session's disappointing U.S. economic reports continued to weigh and as hopes for a resolution between the new Greek government and its international creditors boosted sentiment.

Sentiment on the dollar remained vulnerable after data on Monday showed that U.S. consumer spending fell at the fastest rate since September 2009 in December, dropping 0.3% as households saved on cheaper gasoline prices.

Separate reports showed that U.S. construction spending rose less than expected in December, while manufacturing growth slowed.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.17% to 94.66.

EUR/USD edged up 0.09% to 1.1352. The euro found some support the Greek government outlined its plans to renegotiate the terms of its bailout with its creditors, retreating from demands for a debt writedown.

Greek Finance Minister Yanis Varoufakis has outlined a “menu of debt swaps” to ease the burden of the country’s debt, under which creditors would swap outstanding debt for new growth-linked bonds.

Earlier Tuesday, Spain’s Employment Ministry earlier reported that the number of unemployed people increased by 78,000 last month, disappointing expectations for a drop of 32,400. The number of unemployed people fell by 64,400 in December.

The pound was also higher against the dollar, with GBP/USD up 0.15% to 1.5066 after Markit and the Chartered Institute of Purchasing & Supply said that their U.K. construction purchasing managers' index increased to 59.1 last month from a reading of 57.6 in December.

Economists had expected the index to dip to 57.0 in January.

Elsewhere, USD/CHF fell 0.21% to trade at 0.9261 and EUR/CHF slipped 0.12% to 1.0512 after rallying over 1% amid reports the Swiss National Bank was unofficially targeting an exchange rate of 1.05 to 1.10 francs per euro. The central bank declined to comment on the report.

Figures from the SNB on Monday showed that sight deposits jumped to 383.32 billion francs last week after an 8% increase in the previous week to 365.48 billion francs. The data indicated that the bank has been purchasing foreign currency in the market.

Meanwhile, USD/JPY eased 0.08% to 117.46.

The Australian and New Zealand dollars were sharply lower, with AUD/USD tumbling 1.56% to 0.7681 and NZD/USD down 1.18% to 0.7219. Earlier Tuesday, the Reserve Bank of Australia surprised markets by unexpectedly lowering its benchmark interest rate to a new record-low 2.25% from 2.50%, citing an overvalued local currency.

In addition, the Australian Bureau of Statistics said that the country's trade deficit narrowed to A$0.44 billion in December from A$1.02 billion in November, while building approvals dropped 3.3% in December, compared to expectations for a 5.0% decline.

The Canadian dollar edged higher, with USD/CAD slipping 0.26% to 1.2535.

Later in the day, the U.S. was to release data on factory orders.