Euro Near 8-Month Low Against Dollar on Greece Fiscal Crisis

By Yoshiaki Nohara and Ron Harui

Feb. 9 (Bloomberg) -- The euro traded near an eight-month low against the dollar on concern a European Union summit this week will fail to address Greece’s fiscal crisis, damping demand for assets in the region.

The 16-nation currency was close to the weakest in 11 months versus the yen after EU President Herman Van Rompuy said yesterday the Feb. 11 summit will focus on long-term economic strategy, making no direct reference to Greece. The yen dropped against 14 of 16 major counterparts amid speculation importers and traders sold the currency to profit from recent gains.

“Investors won’t be willing to take the risk to buy higher-yielding currencies unless organizations such as the European Central Bank and EU speak up to rescue Greece,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “If investors switch their attention to the fragility of Europe’s economy, euro weakness may accelerate.”

The euro traded at $1.3658 as of 10:38 a.m. in Tokyo from $1.3649 in New York yesterday. It dropped to $1.3586 on Feb. 5, the lowest since May 20. The European currency was at 121.97 yen from 121.81 yen. It slid to 120.71 on Feb. 5, the weakest since Feb. 24, 2009. The dollar was at 89.29 yen from 89.26 yen.

Europe’s currency dropped 1.3 percent last week against the dollar as Greece struggled to deal with its budget shortfall, the largest in the European Union. The country is trying to convince investors that the deficit, now at 12.7 percent of gross domestic product, can be brought down to the bloc’s 3 percent limit.

‘Worst Possible Signal’

“We are trying to implement a very difficult stability and growth program to which we are fully committed,” Greek Finance Minister George Papaconstantinou said in an interview with Bloomberg Television yesterday. “The worst possible signal which we could be sending out is one calling for outside help.”

European Central Bank President Jean-Claude Trichet will today depart a meeting of policy makers in Sydney a day early to attend the EU summit, ECB spokeswoman Regina Schueller said.

Trichet was in Sydney attending a symposium organized by the Reserve Bank of Australia to mark its 50th anniversary. Schueller said Trichet left early in order to make better flight connections and declined to comment further.

The yen declined versus on speculation Japanese companies sold it to take advantage of the currency’s 3.4 percent rally in the past week against the euro.

“Importers and those who have long positions are selling the yen,” said Hideaki Inoue, chief manager of foreign-exchange and financial products trading at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. “This may be a short-lived position adjustment.” A long position is a bet an asset will rise.

The 14-day relative strength index of the euro versus the yen was at 24.61 today, staying below 30 for a fourth day, according to data compiled by Bloomberg, a sign the currency may be poised to change direction.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
Last Updated: February 8, 2010 20:57 EST

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source: http://www.bloomberg.com/apps/news?pid=20601101&sid=a1xNIjmTY.Mk