Euro Falls Below $1.30 on Concern Greek Debt Crisis May Spread

LONDON, May 5 -- The euro fell below $1.30 for the first time since April 2009 on concern the European Union and International Monetary Fund's 110 billion-euro ($143 billion) aid package for Greece won't contain the region's debt crisis.

The euro slipped against 12 of 16 major counterparts before German Chancellor Angela Merkel speaks to parliament on the bailout. Her coalition has stepped up calls for allowing the "orderly" default of region members burdened with debt to avoid a repeat of the Greek crisis. The dollar advanced against the yen on speculation Asian stocks will extend a worldwide slump in equities.

"A renewed wave of pessimism is sweeping markets," said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. "Fresh concerns over contagion from the Greek fiscal crisis are seeing risk aversion soar. This is causing investors to ditch the euro in favor of 'safe haven' currencies such as the yen and the dollar."

The euro traded at $1.2975 as of 7:46 a.m. in Singapore from $1.2987 in New York yesterday, after earlier falling to $1.2962, the weakest since April 22, 2009. The currency was at 123.04 yen from 122.78 yen yesterday, when it slipped to 122.65, the lowest since April 28. It fetched 85.72 pence from 85.75 pence yesterday, when it slid to 85.66 pence, the least since Aug. 19.

The dollar climbed to 1.1041 Swiss francs from 1.1029 francs, after earlier rising to 1.1052 francs, the strongest since May 2009. The greenback bought 94.82 yen from 94.54 yen. Financial markets are shut today in Japan for a holiday.

European Bond Yields

Europe's single currency traded near an eight-month low versus the pound as bond yields from Spain to Portugal and Ireland climbed on speculation the crisis that began in Greece is spreading.

Yields on 10-year Greek bonds rose 90 basis points to 9.40 percent yesterday. The rate on similar-maturity debt in Spain climbed 9 basis points to 4.13 percent, Portuguese yields advanced 35 basis points to 5.48 percent and the rate on Irish notes increased 18 basis points to 5.30 percent.

Germany's Merkel will open debate on aid for Greece in a speech to parliament today in Berlin. Greek unions plan their third general strike of the year today after workers yesterday occupied the Acropolis and shut down schools and hospitals at the start of a 48-hour walk-out.

"Greek spreads continued to widen and further protests emerged in Greece, which raised concern about whether or not Greece will be able to see the changes through," Brian Kim, a currency strategist in Stamford, Connecticut, at UBS AG, wrote in a research note yesterday. "Our three-month forecast for the euro-dollar remains at $1.30."

The European Union's three-year financial lifeline requires Greece to reduce its budget deficit below the region's limit of 3 percent of gross domestic product by the end of 2014, a year later than originally planned.