Euro Falls to 3-Week Low Against Dollar on Greece Uncertainty

NEWYORK, Mar. 24 -- The euro declined to a three-week low against the dollar after French and German leaders said any aid package for Greece would require help from the International Monetary Fund, damping demand for the common currency.

The 16-nation euro slid to a record against the Swiss franc as investors sought the relative safety of Switzerland's currency, where the economy is improving. New Zealand's dollar fell for the third time in four days after a government report showed the nation's fourth-quarter current-account deficit was wider than economists had forecast.

"It looks like the eurozone can't resolve the Greek crisis by themselves so they are going to the IMF for help," said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. "This casts some doubt over the strength of the European Union. The bias is to sell the euro."

The euro weakened to $1.3474 as of 9:03 a.m. in Tokyo from $1.3499 in New York yesterday after earlier falling to $1.3459, the lowest level since March 2. The single currency slipped to 121.85 yen from 122.03 yen. The dollar traded at 90.41 yen from 90.40 yen.

The euro dropped versus 14 of its 16 major counterparts after a German Finance Ministry official told reporters in Berlin, on condition of anonymity, that Germany and France agreed to back an IMF role in any aid for Greece. The shift before an EU summit that starts tomorrow, came a week after euro-area finance ministers had agreed to a European framework for a bailout.

Greece Concern

German Chancellor Angela Merkel's Christian Democratic Union party expects her to "resist calls to agree" to aid at the European Union summit, CDU parliamentary group finance spokesman Michael Meister said in an interview yesterday. That increased chances that Greece would leave the March 25-26 EU meeting in Brussels empty handed.

"Given strong opposition for any aid among German citizens, key EU members are unlikely to extend support for Greece," said Hirokata Kusaba, a senior economist in Tokyo at Mizuho Research Institute Ltd., a unit of Japan's second-largest banking group. "The euro will continue to weaken."

European Central Bank President Jean-Claude Trichet spoke out this week against offering the low-interest loans for which the Greek government has pressed. Luxembourg's Jean-Claude Juncker, who heads the group of finance ministers in the euro region, said the EU won't "abandon" Greece.

‘Continued Uncertainty'

"The continued uncertainty about the resolution is triggering a medium-term asset allocation shift away from euros," said Jens Nordvig, a managing director of currency research in New York at Nomura International Plc, who forecasts the euro will trade as low as $1.25 by year-end. "It's the longer-term players that are changing how they invest in the euro zone."

The franc strengthened past 1.43 per euro yesterday for the first time, even after Swiss National Bank President Philipp Hildebrand reiterated policy makers are ready to act "decisively" to counter any "excessive" gains.

The franc rose as high as 1.4235 per euro today, before trading at 1.4243 from 1.4275 yesterday.

The New Zealand dollar fell 0.4 percent to 70.48 U.S. cents, and lost 0.4 percent to 63.72 yen.

The South Pacific nation posted a current-account deficit of NZ$3.57 billion ($2.52 billion) compared with a NZ$4 billion shortfall a year earlier, Statistics New Zealand said today. Economists forecast a NZ$1.6 billion deficit, according to a Bloomberg News survey.

"We've seen a drop in the currency on the back of the current-account numbers," said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. "GDP is a much more important indicator in terms of policy underlying the economy. We should see the kiwi pare its losses."