The euro rose against the US dollar finance ministers seek a fresh solution to Greece's debt crisis after Standard & Poor's slashed the country's credit rating to the lowest in the world.
|||The euro rose against the dollar Tuesday as finance ministers seek a fresh solution to Greece's debt crisis after Standard & Poor's slashed the country's credit rating to the lowest in the world.
The European single currency advanced to $1.4448 in London deals from $1.4413 late in New York on Monday. Against the Japanese unit, the dollar gained to 80.25 yen from 80.21.
“The decision by S&P to cut Greece three notches to world's lowest credit rating at 'CCC' with a negative outlook ... did not really hurt the single currency that much,” said CMC Markets analyst Michael Hewson.
“I think the market is hoping that policymakers will come up with another sticking plaster solution at today's Ecofin meeting.
“However, it is hard to see how the impasse between the European Central Bank and Germany can be resolved without some form of credit event Ä and any ripple effects such an event may have on peripheral countries bond yields which are already pushing to new highs in Ireland and Portugal's case,” he added.
Ratings agency S&P announced its latest downgrade on Monday. The latest blow came as European finance ministers meet on Tuesday to discuss a new aid package for Greece that could call on private holders of Greek debt to contribute by accepting delayed payment.
European Central Bank executives have argued against any moves that obliged private investors to take part in a Greek bailout as ratings agencies would likely declare Greece in default, causing unknown dangers for the wider 17-member eurozone.
“In the last 24 hours, Greek fiscal problems have reached crisis point,” said research director Kathleen Brooks at trading site Forex.com.
“Rating agency S&P downgraded Greece to CCC, within touching distance of D or default in credit rating terms.
“This latest downgrade suggests that S&P sees it as almost inevitable that bond holders will be involved in the next bailout for Greece,” she added.
The ratings agency cited the increased chances that the bailed-out eurozone member nation could default.
The euro also won some support as investors became more willing to take risks in the wake of in-line Chinese inflation data.
China's consumer price index jumped to 5.5 percent year-on-year in May Ä far above the official annual target of 4.0 percent Ä as food costs soared on power shortages and crippling droughts in some areas. It was the highest rate since July 2008, when the index rose 6.3 percent.
While the data underlined concerns over rising costs, it met market expectations and helped send equities higher.
Elsewhere in foreign exchange trade, sterling drifted higher against the dollar after publication of unrevised inflation data.
In London on Tuesday, the euro changed hands at $1.4448 against $1.4413 late in New York on Monday, at 115.95 yen (115.61), £0.8816 (0.8800) and 1.2132 Swiss francs (1.2067).
The dollar stood at 80.25 yen (80.21) and 0.8397 Swiss francs (0.8372).
The pound was at $1.6388 (1.6375).
On the London Bullion Market, gold prices dipped to $1,520.05 an ounce from $1,526.25 late on Monday. - Sapa-AFP
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