Euro falls to 7-month low on fear of Greek default

AP News
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Posted: Sep 12, 2011 5:22 PM
Euro falls to 7-month low on fear of Greek default

The euro fell to a seven-month low against the dollar Monday on fears of a possible debt default by Greece.

Traders believe that Greece is increasingly likely to default. The heavily-indebted country is struggling to convince its neighbors that it has its debt under control. Some are reluctant to release another chunk of emergency aid because Greece is having a difficult time meeting the deficit-cutting requirements of its bailout package.

Senior German officials have hinted that Greece could undergo an orderly bankruptcy to stem the crisis. A default by any nation using the euro might upend the European economy and hurt the value of the region's shared currency.

Without the emergency loans, Greece would be unable to pay its bills. Debt issued by the Greek government would lose much of its value. That could threaten big banks in France and Germany. The banks hold Greek debt, but no one knows how much. Shares of some banks there lost as much as 10 percent Monday.

The instability in Europe drove traders to buy up currencies traders consider to be safer: The dollar and the Japanese yen.

At 4:45 p.m. in New York, the euro was worth $1.3666, compared with $1.3656 late Friday. It had earlier hit $1.3495, its lowest point since February. The euro started the month around $1.43.

The euro also hit a 10-year low against the Japanese yen, falling as low as 103.88 yen.

The British pound was nearly flat _ $1.5865, compared to $1.5864 late Friday. The dollar fell to 77.25 yen from 77.43 yen.

In other trading Monday, the dollar fell to 0.8807 Swiss franc from 0.8841 Swiss franc late Friday. It dipped to 99.29 Canadian cents from 99.73 Canadian cents.