Bloomberg News

Euro Drops From Almost Two-Week High on Debt Measures Concern

July 22, 2011

July 22 (Bloomberg) -- The euro dropped for the first time in four days against the dollar on concern measures announced by European Union officials yesterday to contain Greece’s debt crisis won’t be enough to quell regional turmoil.

The 17-nation currency pared its first weekly gain since July 1 as Fitch Ratings said Greece faces “restricted default’’ after euro-area leaders agreed on a new bailout for the nation that would involve contributions from bondholders. The dollar rose from a four-month low against the yen on speculation the U.S. is approaching a deal to raise its debt ceiling.

“There’s still key uncertainty ahead until the implementation of the Greek deal,” said Lena Komileva, head of Group of 10 strategy at Brown Brothers Harriman & Co. in London. “The EU summit has marked a landmark in the approach to the solvency crisis by presenting a solution for Greece and introducing more active management for contagion risk across the rest of the euro periphery, but there are still risks.”

The euro fell 0.3 percent to $1.4378 at 8:33 a.m. in New York, from $1.4425 yesterday, after reaching $1.4439, the highest since July 6. The shared currency dropped 0.4 percent to 112.55 yen, from 112.94. The dollar was little changed at 78.31 yen after touching 78.22, the lowest level since the day before the Group of Seven intervened to weaken Japan’s currency following the March 11 earthquake and tsunami.

After eight hours of talks in Brussels, euro-area leaders announced 159 billion euros ($229 billion) in new aid for Greece yesterday, with bondholders agreeing to contribute to the package. They also expanded the role of the 440-billion euro rescue fund to buy debt across distressed nations, assist troubled banks and offer credit lines.

--With assistance from Paul Dobson in London. Editors: Dennis Fitzgerald, Dave Liedtka

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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