Euro falls again as doubts grow about Greece bailout
THE euro fell for a third day against the dollar as Greece tried to end speculation that it may be having doubts about a plan that provides European Union and International Monetary Fund support in refinancing its debt.
Europe's common currency slid the most versus the yen in almost six weeks after a report that Greece wants to bypass IMF involvement if it needs assistance because the conditions would be too stringent.
The nation's finance minister denied the story. The Canadian dollar strengthened to parity with its US counterpart for the first time since July 2008 as crude oil traded near the highest in more than 17 months.
"There are a lot of questions about a bailout that haven't been answered yet," said Aroop Chatterjee, a currency strategist at Barclays Plc in New York. "We don't expect the situation to spiral out of control. It will be slow-burning, and there will be greater downside pressure on the euro until clarity comes."
The currency tumbled 1.5 percent, the most on an intraday basis in almost two months.
It was down 0.88 percent against the dollar at $1.3364, after hitting a session low of $1.3357, the lowest in more than a week. It also fell.3 percent against the yen to 125.55 yen.
The dollar remained stronger than the euro and weaker than the yen after minutes released yesterday of the US Federal Reserve's March 16 meeting showed policy makers saw signs of a growing economic recovery that could be hobbled by unemployment and tight credit.
Greece's borrowing costs shot up following a report, later denied, that Athens was seeking to revise a deal hammered out last month which would provide a European and International Monetary Fund rescue to prevent a default.
Markets have so far appeared unconvinced that the bailout plan, which would provide Greece with bilateral loans, would be sufficient to contain the country's debt crisis.
The interest rate gap, or spread, between Greek 10-year bonds and equivalent German issues surging to 406 basis points, or 4.06 percentage points, yesterday afternoon .
"Today was a very bad day for Greek bonds," Finance Minister Mr Papaconstantinou said. "(But) Greece is not seeking to borrow today."
"The country has covered all its borrowing needs for April and now . . . has more than a month before it is forced to borrow again," he said on TV, adding that Greece would seek to raise more than €10 billion in May.
But Mr Papaconstantinou added that Greece "cannot continue for long" paying high interest rates for its borrowing.
However, markets have remained jittery.
"Today's 60 basis points surge in Greek government bond yields underlines yet again the continued precariousness of the troubled economy's position," said Jonathan Loynes of Capital Economics.
Today, inspectors from the IMF are due in Athens to review progress in government austerity cuts. Greece has promised draconian fiscal reforms to reduce debt but remains under pressure from high borrowing costs. (Bloomberg)