Metals News
Euro May Fall Second Day on Concern Greece Problem Unresolved
data analysis

NEWYORK Mar. 18 -- The euro may fall a second day versus the dollar after a spokesman for German Chancellor Angela Merkel's party said Greece should go to the International Monetary Fund if it needs aid, reviving concern about how to rescue the nation with the region's widest budget deficit.

The greenback was near a two-month low versus the New Zealand and Australian dollars before a report forecast to show U.S. consumer prices rose by the least in seven months in February. Canada's dollar traded near its strongest versus the U.S. dollar since July 2008 as oil, the nation biggest exports, reached a 10-week high and stocks gained yesterday.

"Fundamentally the euro will be undermined by the situation, even though there may not be a complete sovereign default by Greece," said Derek Mumford, a Sydney-based senior consultant at HiFX, a foreign exchange risk management firm. "The euro-zone will have low growth and the euro will suffer."

The euro traded at $1.3736 as of 8:43 a.m. in Tokyo, after falling 0.2 percent yesterday to $1.3738. It touched $1.3818 yesterday, the highest since Feb. 9. The 16-nation currency bought 124.24 yen from 124.06 in New York.

The greenback was at 90.44 yen from 90.31 yen. Australia's dollar fetched 92.31 U.S. cents after yesterday reaching 92.52 cents, the most since Jan. 19. New Zealand's currency bought 71.37 cents and yesterday reached 71.79 cents, the strongest level since Jan. 21.

'Very Daring Experiment'

The euro yesterday erased gains against the dollar and yen as Michael Meister, a lawmaker who is chief finance spokesman for Merkel's Christian Democratic Union, said attempting a Greek rescue "without the IMF would be a very daring experiment."

"We have to think about who has the instruments to push for Greece to restore its capital-markets access" if ultimately needed, Meister said in an interview in Berlin. "Nobody apart from the IMF has these instruments."

The German shift underscores Merkel's attempts to steer clear of a commitment to bailing out Greece and risks scuttling European Union efforts to establish a contingency plan for the debt-strapped nation. Merkel used a budget speech in parliament in Berlin yesterday to caution against "overly hasty" pledges of financial support.

The greenback my weaken versus the Australian and New Zealand dollars for a third day as U.S. consumer prices probably rose 0.1 percent in February, according to economists' forecasts before the Labor Department report today.

Central Banks

The Canadian dollar traded at C$1.0105 after yesterday touching C$1.0071, its strongest level since July 2008, as oil prices rose. Crude for April delivery traded at $82.75 a barrel after gaining 1.5 percent yesterday to settle at $82.93, the highest closing price since Jan. 6.

The dollar and yen have fallen against most of their major counterparts over the past five days as the Federal Reserve kept its target rate unchanged on March 16 and the Bank of Japan doubled a loan program aimed at countering deflation yesterday.

Fed officials repeated March 16 that their program to buy $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt will be completed by March-end. In contrast, Japan's policy makers yesterday increased the bank's three-month loan facility to 20 trillion yen ($222 billion) and also kept the benchmark overnight lending rate at 0.1 percent.

"At a time when other major central banks, in the shape of the Fed, the Bank of England and the ECB have slowed or stopped printing money, we are inclined to believe these currencies should and will appreciate against the yen," said Annette Martins, a currency strategist with Macquarie Bank Ltd. in Sydney. "We look for dollar-yen to trend toward 100 yen later this year. We also see upside risks for sterling-yen and euro- yen toward year-end."


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