NEW YORK, March 23 – The euro fell against the dollar on Tuesday weighed by concerns that euro zone policy makers are unlikely to provide a rescue package for Greece at a summit later this week.
Worries over Greece’s debt sustainability and the country’s ability to secure financial aid is keeping the euro close to a three-week low and supported some safe-haven flows into the U.S. dollar. Traders said the pressure on the euro will continue ahead of a summit of European Union leaders on Thursday and Friday.
German Chancellor Angela Merkel, facing fierce opposition in Germany to any bailout of the highly indebted country, said on Monday there was no need to discuss an aid mechanism at the EU summit. For details see, [ID:nLDE62L257]
“The risk is for further weakness in the euro if nothing concrete comes out of this summit in terms of financial help to Greece,” said Joe Manimbo, a currency trader at Travelex Global Business Payments, in Washington D.C. “But for that to happen we may need to see Germany changing its stance. Until then, the pressure on the euro is still on.”
The euro has fallen more than 5 percent against the dollar since the start of the year as concern mounted over the debt sustainability in Greece and other smaller euro zone members.
In morning trading in New York, the euro was down 0.3 percent against the dollar EUR= at $1.3517, not far from Monday’s three-week low around $1.3461.
The dollar index .DXY, a measure of its performance against six other currencies, rose 0.2 percent to 80.811, edging closer toward an eight-month high of 81.342 set in February.
Greek Finance Minister George Papaconstantinou said however on Tuesday Greece wants a European solution to its debt crisis and expects positive results from the EU summit. [ID:nATH005305]
European Central Bank vice-president nominee Vitor Constancio added fuel to the fire, saying IMF loans would not be enough to satisfy Greek needs [ID:nWLB0642].
“It is looking increasingly unlikely that there will be an EU aid package for Greece which leaves the euro in a negative position,” said Ian Stannard, Senior Currency Strategist at BNP Paribas.
“I expect a test of this year’s low at $1.3435, and if that breaks, a quick move toward $1.3100,” he added.
Against the Swiss franc, the euro EURCHF= slipped to a low of 1.4314 francs, having earlier spiked briefly to a high of 1.4371 after Swiss National Bank Chairman Philipp Hildebrand pledged again to counter any excessive Swiss franc rise. [ID:nLDE62M0D9]
“If you look at the evolution of the SNB’s language it suggests they’re not so worried about it (Swiss franc appreciation) any more,” said Geoffrey Yu, currency strategist at UBS.
