Euro falls on ECB president comments

AP News
Posted: Dec 19, 2011 3:59 PM
Euro falls on ECB president comments

The euro fell against the dollar Monday after the president of the European Central Bank made cautious statements about Europe's growing debt crisis. News that North Korea ruler Kim Jong Il had died initially pushed the yen lower against the dollar, but it has since recovered.

European Central Bank President Mario Draghi said that the central bank was preparing the eurozone's bailout fund for a possible downgrade of France's AAA-credit rating. Draghi said that if France's rating is downgraded by ratings agencies, other countries could receive downgrades too. He also said in an interview with the Financial Times that large-scale government bond purchases were outside the central bank's responsibility.

Rating agency Standard & Poor's put 15 of the 17 countries that use the euro on watch for a downgrade in early December. On Friday ratings agency Fitch warned that it could downgrade Italy, Spain, Ireland, Belgium, Slovenia and Cyprus. Downgrades could complicate Europe's efforts to solve the debt crisis because it will cost more for the countries to borrow money.

On Monday European Union finance ministers failed to come up with $261 billion in new loans for the International Monetary Fund. Failure to come up with the full amount that was promised signals rifts within the European Union and how difficult it will be for leaders to agree on a solution for the debt crisis.

The euro fell to $1.3017 in in late trading Monday from 1.3024 on Friday. Fears that European leaders aren't doing enough to end the region's debt crisis pushed the euro to an 11-month low of $1.2943 Wednesday. It has hovered above that level since then.

The dollar rose to 77.95 Japanese yen in late trading. Earlier it jumped nearly to a three-week high of 78.165 yen on news that North Korea's ruler died. The dollar was worth 77.87 yen late Friday.

Traders are concerned that the transition of power in North Korea might not go smoothly. Fears of political unrest in the region also pushed the South Korean won lower against the dollar Monday.

In other trading, the British pound rose to $1.5520 from $1.5499 late Friday. The dollar fell to 0.9364 Swiss franc from 0.9372 Swiss franc and to 1.0365 Canadian dollar from 1.0384 Canadian dollar.