Euro falls on Greek worries

                                     

Currencies linked to global growth fell on Wednesday while the dollar and yen strengthened on haven demand as risk aversion continued to dominate trading.

The euro fell back below $1.30 to the dollar ahead of talks in Greece to form a coalition government, with political uncertainty following elections at the weekend driving markets.

The single currency dropped to its lowest level since mid-January, hitting $1.2910 before recovering slightly to $1.2945, a fall of 0.4 per cent on the day.

The pound saw further erosion of its recent gains against the dollar, falling 0.2 per cent to $1.6067, its weakest level in two weeks. The yen continued to attract haven demand, rising against all other leading currencies.

Earlier in the session the dollar had fallen 0.5 per cent to Y79.41, its weakest level in over 11 weeks. The euro dipped 0.6 per cent to Y102.73, also its lowest level since mid-February. The pound fell 0.7 per cent to Y127.79.

The dollar strengthened against other leading currencies with the exception of the yen.

The Australian dollar was one of the biggest fallers, losing 0.6 per cent to reach a fresh year-to-date low against the US dollar of $1.0017, after comments from Julia Gillard, Australia’s prime minister, about the possibility of a further interest rate cut to boost the economy.

“As the poster child for risk, the Australian dollar continues to suffer in this risk-off environment, as forward curves build in ever greater expectations of rate cuts,” said Elsa Lignos at RBC Capital Markets.

The Polish zloty failed to hold on to its gains against the euro after the central bank unexpectedly raised interest rates in an effort to control inflation. The zloty briefly rose to its strongest level against the single currency since mid-February but later fell 1 per cent against the euro to 4.2452 zlotys, with the risk averse mood dominating trading.

Credit Suisse analysts said: “We believe the worsening growth outlook in the eurozone will continue to weigh on the zloty, while the large current account deficit exposes the zloty to swings in global risk appetite.”