Euro falls to 3-week low vs dollar on Greek fears

AP News
Posted: Nov 01, 2011 5:05 PM
Euro falls to 3-week low vs dollar on Greek fears

The euro fell sharply against the dollar Tuesday after Greece said it would let its people vote on a European plan to help the country's economy.

Investors are concerned that Greece could delay or reject the European plan, which could lead the country to default on its debt and roil financial markets. European leaders agreed on the plan just last week. Greece's lenders want the government to make deep spending cuts.

"The market is looking at the Greek referendum news in astonishment," said Kathleen Brooks, research director at "The rest of the world must be seriously wondering how Europe can survive if things like this can happen."

The euro fell to $1.3715 late Tuesday from $1.3924 Monday. At one point the euro fell to $1.3607, its lowest point since Oct. 12.

The euro is down nearly 4 percent after hitting a seven-week high Thursday, when the European financial rescue plan was announced. Traders were initially relieved that European leaders had agreed on a deal that could contain the region's debt crisis, but optimism has faded as traders realized it will take a lot more work before the plan will actually be implemented.

Concerns that Italy may not be able to avoid the debt crisis also pushed the euro lower Tuesday. Italy is the euro zone's third-largest economy, and its debts may be too large to be covered by the bailout fund. On Tuesday, the yield on Italy's 10-year bonds rose to 6.20 percent. That indicates that investors' confidence in the country's financial prospects is declining.

In other trading Tuesday, the British pound fell to $1.5962 from $1.6129. The dollar also rose to 78.33 Japanese yen from 78.05 yen, to 0.8863 Swiss franc from 0.8736 Swiss franc and to 1.0168 Canadian dollar from 99.41 Canadian cents.

The U.S. dollar was also higher against the Australian, New Zealand and Hong Kong dollars, and also against Latin American currencies.