Euro rises in New York

The euro rose on Tuesday as investors bet Greece would pass an austerity package needed to avert a debt default, though traders said uncertainty about a long-term solution would limit further gains in the currency. Tough talk on inflation from European Central Bank President Jean-Claude Trichet also boosted euro demand. Markets expect the ECB to raise interest rates next month despite the debt woes in Greece and elsewhere.
Greece's parliament will vote Wednesday and Thursday on a package of spending cuts, tax hikes and privatisations required by international lenders as a condition for further aid. Without the money, Greece could be bust by next month. While a voluntary restructuring of Greek debt is possible in the future, Serebriakov said a 'yes' vote on the austerity measures would "remove the worst case scenario for the euro." The euro last rose 0.5 percent to $1.4362. It hit a session high after the Portuguese government said it plans to be scrupulous in meeting terms of a bailout.
One-month implied euro/dollar volatility last traded around 13 percent. One-month 25-delta euro/dollar risk reversals, which measure the skew between euro puts and calls, traded around 2.6 in favour of puts, suggesting bearish sentiment on the euro. "I think the measures will be passed. Most people do, but euro puts are expensive on the off chance that they don't go through," said a trader in London.
The euro climbed to an almost eight-week high of 89.80 pence. Sterling also fell to a 13-month low versus a currency basket. The dollar rose 0.4 percent to 81.12 yen, while it fell to a record low of 0.8276 Swiss francs. Anti-austerity protests turned violent in Athens on Tuesday as the European Union warned Greek lawmakers the country faces immediate default unless they back an unpopular economic plan. Progress was meanwhile reported in talks to persuade European banks and insurers to voluntarily roll over maturing Greek debt as part of a planned second rescue package designed to give the eurozone country breathing space.