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Euro hits 11-year low after Syriza victory in Greece Euro hits 11-year low after Syriza victory in Greece
(about 1 hour later)
The euro has fallen sharply against the dollar after the anti-austerity Syriza party won the Greek general election.The euro has fallen sharply against the dollar after the anti-austerity Syriza party won the Greek general election.
The euro briefly fell as low as $1.1088 - the lowest level against the dollar in more than 11 years.The euro briefly fell as low as $1.1088 - the lowest level against the dollar in more than 11 years.
Traders say there is uncertainty about what happens next in Greece, as Syriza leader Alexis Tsipras has pledged to renegotiate Greece's debts. Syriza leader Alexis Tsipras has pledged to renegotiate the terms of Greece's €240bn bailout and reverse many of the austerity cuts.
He has also vowed to reverse many of the austerity measures adopted by Greece in return for bailout deals. But he said his government wanted a negotiation, not confrontation, with its international lenders.
"The troika for Greece is the thing of the past," he said after the election result, referring to the country's biggest international lenders - the European Union, International Monetary Fund (IMF) and European Central Bank (ECB). "The new Greek government will be ready to co-operate and negotiate for the first time with our peers a just, mutually beneficial and viable solution," Mr Tsipras said.
Greece's current bailout programme ends in February, and economists say a short term deal will be negotiated, but difficult talks lie ahead. The troika of lenders that bailed out Greece - the European Union, European Central Bank, and International Monetary Fund - imposed big budgetary cuts and restructuring in return for the money.
"There is a danger of a prolonged stand-off with the Troika as Syriza attempts to negotiate some form of official debt restructuring while not reneging on its promises to voters to cut taxes, raise government spending and increase the minimum wage," said Jonathan Loynes, chief european economist at Capital Economics in a research note. But Mr Tsipras said: "The troika for Greece is the thing of the past."
Greece's current bailout programme ends in February, and economists say a short term deal will be negotiated, but difficult talks lie ahead. Germany has indicated that it is not prepared to renegotiate the bailout terms, raising the prospect that Greece could end up leaving the eurozone.
"There is a danger of a prolonged stand-off with the troika as Syriza attempts to negotiate some form of official debt restructuring while not reneging on its promises to voters to cut taxes, raise government spending and increase the minimum wage," said Jonathan Loynes, chief European economist at Capital Economics.
Further uncertaintyFurther uncertainty
The euro last traded at $1.1186 in Asian trade, recovering some of its earlier losses. Michael Hewson, chief market analyst at CMC Markets, said: "Tsipras's comments don't appear to leave any room for doubt as he stated that the troika and the bailouts belong to the past,.
"Until we actually know the exact stance new party in Greece will take on the debt, we're going to see further uncertainty for the euro," said Jason Hughes at trading firm CMC Markets. "You can be almost certain that these negotiations will be watched carefully by the anti-austerity movements in Spain, Portugal, Italy and France to see what measures if any Greece is able to get out of EU politicians to deal with the problem of Greece's debt, and the terms of the bailout programme."
Mr Hughes said $1.10 is a key level for the euro, if it breaks that then it could head to parity against the dollar. The announcement of a new stimulus programme by the European Central Bank last week had already weakened the euro.
"The worst case scenario is we see Greek exit from the euro and that something markets won't respond to particularly well," he said. Recent weak economic data has also hurt the currency, and Ryan Huang, strategist at IG Markets, said: "We can't rule out the macro economic landscape from getting worse and affecting sentiment."
Euro pressure Last month, inflation in the eurozone turned negative for the first time since 2009, partly due to the recent sharp fall in oil prices.
The announcement of a new stimulus programme by the European Central Bank last week has weakened the euro.
Recent weak economic data has also hurt the currency and Ryan Huang, strategist at IG Markets said: "We can't to rule out the macro economic landscape from getting worse and affecting sentiment."
Consumer prices in the euro zone fell into the negative for the first time since 2009 last month as inflation unexpectedly dipped 0.2% lower from a year ago on falling oil prices.