WSJ: Euro Falls as Germany Seeks Assurances From Greece
By EVA SZALAY
LONDON—The euro fell after Germany said it was still missing documents from Greece and that it needed further assurances from the country that reforms would continue after national elections in April.
The common currency traded at session lows against the dollar and the yen and hit the day's low against the Swiss franc and sterling after the comments reinforced fears that the Greek bailout process is stalling.
It traded at $1.3118 early in New York, down from $1.3131 late Tuesday, after the German Ministry of Finance made the comments. Earlier, euro-zone finance ministers cancelled a face-to-face meeting that was expected to sign off on Greece's latest bailout tranche. It also was at ¥103.10, from ¥102.99.
Earlier, the Greek conservative party chief gave a written pledge on his commitment to reforms.
Without international aid, the country will face the threat of defaulting on debts that come due March. 20.
The common currency had swooned late Tuesday in New York when the meeting of finance ministers was cancelled. Eurogroup President Jean-Claude Juncker blamed a lack of commitment from Greece to implementing its cost-saving plans. The meeting is now going to be a teleconference at 11 a.m. ET.
But the euro recovered in Asian trading after the governor of the People's Bank of China reiterated his support for Europe, and said China would increase its holdings of the common currency. That pushed the euro to the day's high at $1.3191 against the dollar, and it stayed close to that point for the European session.
Traders failed to take comfort from better-than-expected German and French economic growth numbers. Data confirming that Italy and the Netherlands slipped back into a technical recession didn't help confidence either. Germany notched up a 0.2% contraction in the last quarter of 2011 against views of a 0.3% fall. France managed a 0.2% quarterly growth, while both Italy and the Netherlands plunged deep into the red with a 0.7% contraction.
The euro-zone economy as a whole contracted by 0.3% in the last quarter of 2011, but the print managed to beat expectations for a 0.4% drop in activity.
Sterling was also steady despite soggy unemployment numbers and a less-than-upbeat price growth and economic assessment from the Bank of England. The bank's Quarterly Inflation Report left the door open for expanding the bank's current £325 billion asset purchase program, and stressed threats to growth emanating from the euro area.
"The Monetary Policy Committee's forecasts for growth still look very optimistic, with the MPC expecting growth to accelerate to about 3% by the end of next year," said Vicky Redwood, an economist at Capital Economics in a note to clients. "If growth is much weaker, as we expect, then [quantitative easing] is still likely to be extended further this year."
The Hungarian forint firmed to its highest level against the euro since Sept. 28 after the Hungarian central bank announced the introduction of a new facility aimed at boosting bank lending in the country. The euro hit the multimonth low against the forint at 287.90 forints.
