Euro hits 9-month low vs dollar on Greece worries

AP News
|
Posted: Oct 03, 2011 4:03 PM
Euro hits 9-month low vs dollar on Greece worries

The euro plunged against other major currencies Monday as signals that Greece might default caused traders to dump European investments.

The dollar soared against other currencies as traders sold stocks and piled into safer investments.

Greece's government said Sunday that it missed deficit-cutting targets set by its international lenders. Those lenders are considering whether to give Greece its next installment of bailout cash. Without it, Greece will run out of money this month.

A default by Greece would shock the world's financial system, and might even tip the global economy back into recession. Europe's economy is barely growing, and economists have been lowering their forecasts for economic growth in the U.S.

Financial companies are of greatest concern to investors. Banks in France and Germany hold billions in debt issued by Greece and other countries that are struggling. A default by Greece would cause those holdings to lose value quickly, threatening the banks and scaring off potential business partners. If banks stop lending to each other, the global credit system might freeze up.

The euro fell to $1.3198 at 3:24 p.m. Eastern time Monday, from $1.3424 late Friday. That was its lowest point of the day, and the lowest value against the dollar since Jan. 13.

Europe's shared currency also plunged to 101.11 Japanese yen, a 10-year low.

The dollar rose against most other currencies as rapid selling by global stock traders increased demand for investments that are seen as less risky. The dollar is considered a safe bet mainly because it gives holders access to the market for U.S. Treasury securities. Treasurys are still seen as the safest bet around, despite a credit rating downgrade by Standard & Poor's this summer.

Analysts said much of the demand for dollars came from traders selling investments in emerging markets such as Brazil and China. Those nations' economies depend on consumer demand in Europe and the U.S. If developed economies shrink, emerging markets would likely plunge.

A sell-off in U.S. stock markets also helped the dollar. The Dow Jones industrial average fell 258 points as fears about Europe continued to intensify.

The British pound fell to $1.5458 British pound from $1.5626 late Friday. The New Zealand dollar fell to 75.61 cents from 76.39 late Friday.

The dollar rose to .9190 Swiss franc from .9051 late Friday. It rose to 1.0499 Canadian dollar from 1.0438.

The dollar fell to 76.52 yen from 77.08 late Friday.