Dollar falls after leaders' solidarity boosts euro

AP News
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Posted: Sep 14, 2011 5:32 PM
Dollar falls after leaders' solidarity boosts euro

The dollar fell against other major currencies Wednesday after European leaders signaled that they are prepared to help Greece avoid defaulting on its debts.

The leaders of Greece, France and Germany said that Greece is an "integral" part of the currency union after an emergency teleconference Wednesday night. They pledged to help it resolve its debt problems without filing for bankruptcy or otherwise failing to repay its lenders.

The news quelled fears that Greece could default in the coming weeks. It gave traders hope that Europe's economy could remain relatively stable. The shared currency rose against the dollar and recovered some losses against the Japanese yen. It sank earlier near a seven-month low against the dollar and a 10-year low against the yen.

At 4:30 p.m. Eastern time, the euro rose to $1.3752 from $1.3711 late Tuesday. It fell below $1.36 early Wednesday, before the joint European statement.

The euro recovered against the yen, to 105.41 yen from 105.25 late Tuesday.

If Greece failed to pay its debts, major European banks that hold billions in Greek bonds could suffer losses, threatening Europe's economy.

Fears of a recession in Europe punished the euro in recent days. Traders exchanged euros for dollars and yen, which are seen as safer.

The call between European leaders helped calm markets and ease fears that Greece might default in the coming weeks.

Germany and France have Europe's two largest economies. They will bear most of the costs of bailing out Greece. Their support will be crucial if Greece is to avoid default.

The more-stable outlook for Europe lifted the Swiss franc. The dollar fell to 0.8763 franc from 0.8780 franc late Tuesday.

The British pound fell to $1.5769 from $1.58.

In other trading, the dollar fell to 76.65 yen from 76.89. The dollar rose against the Canadian dollar, to 99 Canadian cents from 98.68 late Tuesday.