Euro nears 1 yr low vs dlr on Greece, contagion worries

The euro hovered close to a 

one-year low against the dollar on Tuesday on concerns about 

Greek debt problems and fears of possible contagion to other 

vulnerable euro zone countries. 

The euro's weakness helped propel the U.S. dollar to a near 

one-year high on a trade weighted basis. 

At the weekend European finance ministers agreed a 110 

billion euro bailout package for Greece, but analysts said 

doubts remained about whether the country could make the steep 

budget cuts necessary, with unions planning more strikes. 

"There is disappointment on the Greek package and so many 

obstacles ahead still. Worries over the peripherals will 

continue to weigh on the euro," said Tom Levinson, currency 

strategist at ING, referring to other vulnerable euro zone 

countries such as Spain and Portugal. 

Worries grew that debt problems could spread to other 

countries such as Spain and Portugal, with the IBEX 35 index of 

key Spanish shares losing 3 percent. 

At 0958 GMT, the euro was down 0.5 percent at $1.3126, close 

to its one-year low of $1.3112, with traders saying option 

barriers at $1.3100 were helping cap losses. 

The dollar index, which tracks the performance of the 

greenback versus a basket of six other major currencies rose to 

82.747, its highest since mid-May. 



DOLLAR FIRMS; AUSSIE SLIDES 

Sentiment towards the U.S. dollar was buoyed by data on 

Monday showing U.S. manufacturing registered its fastest pace of 

growth in nearly six years in April, while consumer spending 

rose in March for a sixth straight month. 

Against the yen, the dollar was up 0.1 percent at 94.63, 

having earlier risen as high as 94.98 yen, its strongest since 

Aug. 24. 

Traders saw key technical resistance for the dollar against 

the yen near 95.10, which is the 61.8 percent retracement of the 

dollar's decline from 101.5 to 84.70 yen in 2009. 

Monday's U.S. data showed the U.S. economy continues to 

recover, which analysts said may allow the Federal Reserve to 

start raising interest rates later this year, contrasting with 

expectations of a prolonged period of low rates in Japan. 

A senior IMF official warned on Monday that Japan may face 

bond sales problems if it failed to work out a credible 

medium-term fiscal reform programme. 

A knock to investor risk appetite, however, reflected by a 

more than 1 percent fall in European equities, pushed the euro 

0.4 percent lower against the Japanese currency to 124.28 yen. 

The Aussie dollar slid 1 percent to $0.9172 after the 

Reserve Bank of Australia raised its key rate by 25 basis points 

to 4.5 percent but also signalled the first stage of its 

tightening cycle was over. 

"The RBA signalled there would be a pause in the rate hike 

cycle, which has dampened expectations for further hikes and 

prompted investors to take profit on long Australian dollar 

positions," said Niels Christensen, currency strategist at 

Nordea in Copenhagen.