HONG KONG (AFP) -The euro sank to an 11-year low Monday and Asian equities were muted after an anti-austerity party won Greece’s election, throwing its international bailout into doubt and raising fears it could leave the eurozone.
Oil prices resumed their downward trend after rallying on Friday in response to the death of Saudi Arabia’s King Abdullah, which fuelled uncertainty in the crude market.
The far-left Syriza party was two seats short of winning an outright majority in Sunday’s polls, giving it more bargaining power to take a hard line on rowing back austerity measures.
The group had campaigned on renegotiating the 240-billion-euro European Union-International Monetary Fund bailout that imposed strict spending and taxation rules on Athens.
The possibility of Greece defaulting on its debt repayments is likely to spark renewed fears it could be forced to leave the eurozone.
As the result became clear, party leader Alexis Tsipras told thousands of flag-waving supporters in Athens: “Greece is leaving behind disastrous austerity.”
British Prime Minister David Cameron was among the first world leaders to react, tweeting that it “will increase economic uncertainty across Europe”.
The news hit the single currency in early Asian trade. The euro dived at one point to $1.1088, its lowest level since September 2003, before recovering slightly to $1.1195. That compares with $1.208 Friday in New York.
It was also at 131.99 yen compared with 132.03 yen on Friday.
The dollar was at 117.86 yen compared with 117.80 yen in New York
“Euro selling pressure will continue as Greeks rejected fiscal austerity, heightening the possibility of Greece leaving the currency bloc,” Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., told Bloomberg News. “Markets are sensitive to risk.”
However, Elsa Lignos, a senior currency strategist at RBC Capital Markets, said in a note that the chances of Greece leaving the eurozone were limited.
The single currency was already suffering heavy selling after the European Central Bank on Thursday unveiled a bigger-than-expected bond-buying programme aimed at kickstarting the eurozone economy and fighting off deflation.
Asian stock markets, which surged Friday in response to the ECB move, mostly sank early Monday. But they recovered towards the afternoon, with some ending in positive territory.
Tokyo fell 0.25 per cent, or 43.23 points, to 17,468.52, while in late trade Hong Kong was 0.39 per cent lower and Shanghai edged up 0.40 per cent.
Seoul ended marginally lower, dipping 0.41 points to close at 1,935.68.
Sydney was closed for a public holiday.
On oil markets US benchmark West Texas Intermediate for March delivery was down 68 cents at $44.91 a barrel, and Brent crude for March tumbled 62 cents to $48.17.
Prices initially jumped Friday on news that Saudi Arabia’s powerful King Abdullah had died, fuelling uncertainty in the crude market.
However, the Saudi royal family soon moved to show continuity in the country’s power structure and policies, dampening hopes of a production cut.
Prices have plunged more than 50 per cent since June owing to weak demand and a global supply glut. The fall was exacerbated when OPEC, of which Saudi Arabia is a key member, said it would not cut output.
Gold fetched $1,292.95 an ounce, against $1,294.55 late Friday.