Euro volatile as Greek aid deal delayed

AP News
Posted: Jun 20, 2011 3:45 PM
Euro volatile as Greek aid deal delayed

The euro was volatile Monday after European officials couldn't agree to release key aid for Greece in July. Many investors fear that Greece could default as soon as next month without those loans.

Greece may now have to wait until a meeting of European finance ministers on July 3 to get the aid approved.

But the euro recovered from $1.4190 early in the day to $1.4305 in late trading, just slightly lower than Friday's value of $1.4315.

Some analysts also say that the euro is going to rebound from its recent losses because investors will realize that the European Union and the International Monetary Fund won't let Greece default.

"Although the Greek debt situation seems unsustainable, Europe cannot afford to let Greece fall," said Ashraf Laidi, an analysts with Intermarket Strategy Ltd. in London.

European finance ministers also did sign off Monday on enlarging bailout funds for the most indebted countries using the euro, a move intended to bolster market confidence in the region's weakest countries.

Still, Greece's financial stability is uncertain. Over the weekend, European Union officials delayed approving Greece's next installment of bailout funds until the government passes further budget cuts and other austerity measures.

Greece needs the next bailout installment, worth about $17 billion, to avoid a default on its debt. Investors and analysts say a default could further hurt the European economy as well as banks holding Greek bonds. The installment is part of the 110 billion euro ($157 billion) aid package approved last year.

The Greek Parliament is expected to hold a vote of confidence in the government on Tuesday, which could pave the way for passing austerity measures. The austerity measures are also needed for Greece to get a second bailout.

Some economists say another aid package is necessary because Greece could run out of money next year.

In other trading Monday, the dollar was mixed ahead of an important meeting of U.S. interest-rate policymakers. Federal Reserve Chairman Ben Bernanke will hold a press conference Wednesday, and investors will be on alert for any hint that the Fed might start up more programs to support the economy.

The Fed's program to drive down interest rates, known as "quantitative easing," ends this month.

Lower interest rates tend to hurt demand for a currency when investors feel confident about increasing global economic growth.

The dollar rose to 80.32 Japanese yen from 80.06 yen, while the British pound was nearly unchanged at $1.6183 from $1.6178.

The dollar dipped to 0.8465 Swiss franc from 0.8482 and was slightly weaker at 97.96 Canadian cents from 98.05 Canadian cents.