Euro Declines as Greek Debt Stalemate Increases European Crisis Concern



The euro weakened against almost all of its 16 major counterparts before Greek leaders respond today to demands by international creditors on economic measures.

The 17-nation currency slid versus the dollar with France set to sell as much as 8.5 billion euros ($11 billion) of bills today.

The dollar extended its gain versus the yen to a third day before St. Louis Federal Reserve President James Bullard speaks amid speculation the U.S. central bank will avoid easing monetary policy further. Australia’s currency retreated for the first time in five days after government data showed the nation’s retail sales unexpectedly declined.

“The movement in euro is directly related to the concerns in the market that Greece may not get an agreement,” said Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney. “There is some hesitation in the currency market” ahead of today’s response.

The euro fell 0.7 percent to $1.3067 as of 6:37 a.m. in London from the close in New York on Feb. 3. It lost 0.5 percent to 100.26 yen. The dollar advanced 0.2 percent to 76.72 yen after gaining 0.5 percent over the previous two trading days.

Greek political-party leaders must provide a first response to demands by the European Union, European Central Bank and International Monetary Fund on economic measures, including wage cuts, by 11 a.m. local time today, a spokesman for the biggest party, Pasok, told reporters in Athens.

Prime Minister Lucas Papademos struck a tentative deal with party leaders to extend spending cuts after euro-area finance chiefs told them an increase in the 130 billion-euro aid package wasn’t forthcoming.

Greek Crisis

“If we determine that it’s all going wrong in Greece, then there won’t be a new program — and that means in March you’ll have a declaration of bankruptcy,” Luxembourg’s Jean-Claude Juncker, who chairs euro finance meetings, told Der Spiegel magazine in an interview published yesterday.

Futures traders reduced their bets that the euro will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a drop in the euro compared with those on a gain was 157,546 on Jan. 31, down from a record 171,347 a week earlier.

The euro has fallen 4.8 percent over the past three months, the worst performance among the 10 developed-nation currencies tracked by the Bloomberg Correlation-Weighted Indexes. The yen has advanced 3.4 percent and the dollar has gained 1.2 percent.

Bank of Japan Governor Masaaki Shirakawa said the nation’s economic condition is “severe” because of deflation and the strong yen. The central bank is implementing strong monetary easing measures and will take appropriate steps as needed, he said in parliament in Tokyo today.