WELLINGTON, New Zealand—The euro took an early morning tumble in
Asia and traders are gearing up for more volatility after a first
official projection of Greece's referendum outcome, based on early
counting, indicated at least 61% of Greeks voted "no" to creditors'
demands on Sunday.
The euro fell as low as $1.0979 against the greenback and is
currently trading at $1.1015. The safe-haven Japanese yen benefited
from the turmoil, with the euro falling to ¥ 133.76 and the U.S.
dollar falling to ¥ 121.71.
Markets are skittish as the result "sharply raises the prospect
of an eventual Greek exit from the eurozone," said BNZ FX
Strategist Raiko Shareef. "Clearly, European leaders will not take
this lightly."
He expects the euro to see more movement over the day but driven
by information rather than improving liquidity. Investors will now
be hunting for any clues on how European leaders respond, on the
lookout for comments from high-ranking European officials and/or
the European Central Bank, said Mr. Shareef. He said the pair has
initial support at $1.0950.
"We will be in for a volatile day/week as the U.S. dollar and
yen are being bought in safe haven trading," said Wellington-based
OM Financial senior client adviser Stuart Ive. "We will remain
focused on headlines and wary of Central Bank intervention."
Overall, the likely "no" outcome "leaves the market with more
questions than answers," said ANZ Bank's Senior FX Strategist Sam
Tuck.
While the projected outcome would strengthen the domestic
standing of Greek Prime Minister Alexis Tsipras, who campaigned
vehemently for Greeks to reject lenders' terms for further bailout
funding, he may find it difficult to deliver on his promise to
secure a more lenient bailout deal from Europe, where other
governments, led by Germany, are in no mood to offer Greece more
generous terms.
Mr. Tuck noted a number of European leaders were adamant that a
"No" vote wouldn't strengthen Greece's position at the negotiating
table, making future negotiations difficult and protracted. The
European Central Bank may also find it difficult to extend—or even
maintain—the ELA emergency funding if a deal between Greece and its
creditors isn't close at hand, said Mr. Tuck.
"If the ECB does not extend additional ELA it is very difficult
to see how the banks can open on Tuesday as planned and the
economic crisis will intensify. Surely the probability of a Greek
exit has now increased," he added.
Write to Rebecca Howard at rebecca.howard@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires