Euro sheds recent gains on Greece deal

April 13, 2010

, LONDON, Apr 13 – The euro dipped against the dollar on Tuesday, one day after surging against the US currency in reaction to a financial life-line offered to debt-hit Greece.

The single currency eased to 1.3582 dollars in early London trade, down from 1.3589 dollars in New York late on Tuesday.

Against the Japanese currency, the euro slid to 126.38 yen from 126.69 yen on Tuesday.

The euro had soared on Monday on news of a eurozone safety net plan for Greece over the weekend, but it soon lost steam owing to fears that other members of the single-currency area could now face heavy financial pressure.

"The aid package announced over the weekend has given the single currency a boost, but other debt concerns persist in Portugal, Spain and Italy, and are likely to continue to weigh on the single currency," said analyst Jon Beddell at currency trading website TorFX in a note to clients.

"Despite the prospect of other national melt downs, investor risk appetite remains buoyant, and that has prompted a continued flow of funds out of the relative havens of the US dollar and Japanese yen, and into riskier assets."

The yen won support from a Nikkei newspaper report that the Bank of Japan (BoJ) would consider revising up its consumer prices forecast for the year from April 2011 from an annual drop of 0.2 percent to zero.

"There are expectations that the BoJ will raise its forecast," Credit Agricole forex director Yuji Saito said, adding that comments by central bank governor Masaaki Shirakawa had fuelled the trend.

Shirakawa said on Tuesday that concerns were greatly receding that Japan\’s economy will face another downturn, and that the recovery could help ease the pace of price declines ahead.

"The Japanese economy has been picking up, and fears about a so-called double-dip recession have been greatly fading," Shirakawa told a parliamentary session.

"As for prices, the pace of falls in the on-year consumer price index is expected to slow, with demand and supply conditions improving," he said.

The comment and news report weakened speculation that the central bank will ease its monetary policy later this month, economists said.

Until recently, dealers believed the BoJ might further loosen monetary policy to tackle deflation at its board meeting on April 30.

In London on Tuesday, the euro was at 1.3582 dollars against 1.3589 dollars on Monday, at 126.38 yen (126.69), 0.8826 pounds (0.8840) and 1.4375 Swiss francs (1.4395).

The dollar stood at 93.05 yen (93.21) and 1.0584 Swiss francs (1.0593).

The pound was at 1.5387 dollars (1.5368).

On the London Bullion Market, the price of gold fell to 1,148.80 dollars an ounce from 1,158.50 dollars an ounce on Monday.

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