Euro Maintains Declines as Standard & Poor’s Cuts Greece’s Credit Ratings

Feb 28, 2012 -- The euro held a decline against most of its major peers after Standard & Poor’s cut Greece’s credit rating to “Selective Default” as parliaments across the euro region vote on the indebted nation’s latest aid package.

S&P lowered Greece’s rating from CC, two levels above default, after the government added clauses to its debt designed to mop up investors unwilling to take part in the exchange, the New York-based company said in a statement yesterday. Losses in the 17-nation euro were limited as the European Central Bank prepares to allot a second round of unlimited three-year funds to help shore up the region’s banks tomorrow.

"The ratings agencies are now confirming what the market was expecting in terms of a Greek default, which may weigh on sentiment a little,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. (CBA) "We’re expecting a shallow recession in Europe, which will keep euro on the back foot over the next few months.”

The euro was little changed at $1.3406 as of 8:46 a.m. in Tokyo from $1.3398 in New York yesterday, when it fell 0.4 percent. The currency slid 0.1 percent to 107.90 yen, following a 1.1 percent drop yesterday. The dollar fetched 80.49 yen from 80.61 yen.

European banks are likely to tap the ECB for 470 billion euros ($630 billion) in three-year funds, according to a Bloomberg News survey of analysts. That would compare with the 489 billion euros taken by lenders at the last auction on Dec. 21. The ECB will announce the results of a three-month tender at the same time.