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Euro Rises as Threat of Greek Exit Judged Overdone; Yuan Drops

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The euro maintained a rally from an 11-year low amid speculation the victorious Syriza party in Greek elections will pursue its anti-austerity agenda without forcing an exit from the currency bloc.

The Russian ruble closed at the weakest level on record yesterday in Moscow after Standard & Poor’s cut the nation’s credit rating to junk. The dollar held a gain versus the yen with the Federal Reserve forecast to raise interest rates this year. The Australian dollar was 0.8 percent from its lowest since July 2009 touched yesterday, before the release of a private gauge of business confidence.

“They don’t seem to have what I’d view as a far-left goal -- it’s not like they’re going to come out and default on all their debt,” said Matt Derr, a foreign-exchange strategist in New York at Credit Suisse Group AG, said of Syriza. “The euro is getting a bit of a relief rally.”

The euro was little changed at $1.1245 at 8:54 a.m. in Tokyo, after yesterday sliding to $1.1098, the lowest level since September 2003. The common currency gained 0.2 percent to 133.32 yen from Monday when it touched 130.15, the weakest since September 2013. The dollar bought 118.55 yen after gaining 0.6 percent yesterday to 118.46.

The ruble was the biggest loser of the dollar’s 31 major peers Monday, extending declines after S&P lowered the sovereign’s rating to BB+ -- non-investment grade -- from BBB-. The currency slumped 6.9 percent to extend it’s decline this year to 11 percent. It closed at 68.7990 per dollar.

Independent Greeks

The euro remained higher against most of its 16 major peers after Alexis Tsipras’s Syriza party party and the anti-bailout Independent Greeks announced plans for a coalition in Athens to control the 300-seat chamber. Syriza was two seats shy of the 151 needed for an absolute majority in Greece’s parliament, according to the latest results from the Interior Ministry.

Even in a fragile coalition, the result hands Tsipras a mandate to confront Greece’s austerity program, imposed in return for pledges of 240 billion euros ($270 billion) in aid since May 2010.

Finance chiefs from the 19-nation euro area signaled their willingness to do a deal with Tsipras -- so long as the new Greek prime minister drops his demand for a debt writedown. At a meeting in Brussels on Monday, ministers agreed quickly to work with the new government to help keep Greece in the euro, Dutch Finance Minister Jeroen Dijsselbloem said.

Bigger Picture

“The market is treating Syriza’s win as an anti-austerity movement more than an anti-euro movement,” Sireen Harajli, a Mizuho Bank Ltd. strategist in New York, said in a phone interview. “The bigger picture is QE instead of Greece.”

The Fed is forecast to leave interest rates unchanged when policy makers meet this week, a Bloomberg survey of economists shows. The chance of a interest-rate increase by policy makers’ October meeting was 53 percent, futures data showed, down from 72 percent at the end of 2014.

The U.S. central bank starts a two-day meeting later today.

Yuki Sakasai, a foreign-exchange strategist at Barclays Plc in New York, said the Fed was likely to repeat its stance from the last meeting. “There may be some positioning ahead of the meeting and push up the dollar slightly against the yen, but the Fed’s basic stance is not going to change.” Policy makers said in a statement after their December meeting that they can be “patient” in their approach to raising rates.

The euro has tumbled 4.7 percent this year, the worst performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen rose 4.5 percent and the dollar gained 3.4 percent.

The Australian dollar was little changed at 79.20 U.S. cents from Monday when it dropped to 78.55, the weakest level since July 2009.

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