The euro rose against the dollar on Wednesday after Greece approved austerity measures needed to avoid a default, but whether its government can implement them could cap gains for the currency. Greek Prime Minister George Papandreou won a parliamentary majority in favour of a five-year austerity plan, clearing a major hurdle in Greece's bid to win access to international funding.
Expectations for a positive outcome buoyed the euro this week and pushed it to a two-week high of $1.4449 on trading platform EBS earlier in the session. Greece's government must now win approval on Thursday for legislation detailing specific implementation measures for the 28-billion-euro austerity package.
If approved, European Finance ministers will meet on July 3 to approve the next bailout tranche and discuss options to ensure continued financing for the country. The euro was last at $1.4428, up 0.4 percent, with traders citing an options barrier with offers to sell at $1.4450. It jumped 0.8 percent to 1.2048 Swiss francs, moving away from a record low around 1.1808 set on Monday.
The European Union and International Monetary Fund have insisted Greece pass both bills before disbursing the next 12-billion-euro tranche of Greece's bailout program. The dollar fell 0.3 percent to 80.84 yen, while it lost 0.5 percent against a basket of currencies, reaching 74.678. The euro could find some support from interest-rate differentials as the European Central Bank is widely expected to raise rates in early July.
Recent comments from ECB President Jean-Claude Trichet underscore that the ECB is still on course to hike rates next week, according to Marc Chandler, global head of currency strategy at Brown Brothers Harriman. "The recent string of US economic data has been relatively soft, and there is some downside risk to next week's US employment data."