The Whole Forex World Affected by Greek Debt

By: Hillel Fuld
The EUR declined Thursday afternoon following data that showed Greece's budget deficit was significantly worse than originally assumed. This also raised concerns that the Greek crisis crisis might very well affect additional euro zone countries.

Eurostat modified Greece's 2009 budget deficit by to 13.6% of gross domestic product from 12.7 percent. These new numbers then drove the EUR to a session low of $1.3356.

The Greek/German 10-year government bond yield spread increased to 542 basis points, and the cost of putting an insurance in place for Greek debt also rose to record highs.

"The euro could have been affected by the Eurostat data as the Greek budget deficit figures were higher," said Adarsh Sinha, currency strategist at Barclays Capital. "The data highlights the fiscal issues and contagion issues."

The data came as Greece began discussions with European and IMF officials on Wednesday on a potential deal to aid them and a three-year policy plan but it could take multiple weeks before Athens could access the funds if needed.

Greece is estimated to need to raise approximately 10 billion EUR by the end of may to refinance existing debt, make their existing interest payments as well as fund the deficit.

"The focus has moved from liquidity concerns to one where the market is discounting a debt restructuring or possible default," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.

By 1041 GMT, the EUR was down 0.1 percent at $1.3363. Support was seen around $1.3340, traders said.

Against the GBP, the euro hit a two-month low of 86.61 pence after UK data suggested Britain's outlook has improved and in anticipation of GDP numbers due on Friday.

Thursday data showed UK retail sales came in at 0.4 percent, which was lower than expected in March, but February's figures were revised significantly higher.