Euro Slides Against Dollar on Renewed Fears Over Greece

   By James Ramage and Josie Cox 

        The euro fell against the dollar to its largest one-day drop in two months, reversing some of its gains from last week as renewed fears about Greece's ability to pay creditors surfaced to rattle the common currency.
        The euro shed 1.13% against the dollar in late-afternoon trade to $1.1317, its sharpest decline against the U.Sl currency since March 19, snapping a four session winning streak.
        The euro reeled from news over the weekend that European politicians stepped up pressure on Greece to expedite structural reforms to get further cash from creditors.
        A spokesman for the European Commission said on Monday that a summit of European Union leaders in Latvia this week is unlikely to bring a breakthrough in talks on continued financing. Later in the day, Pierre Moscovici, the European Union's economics commissioner, said that substantial progress had been made in talks between Greece and its international lenders, but that time is running out for Athens.
        Greece made last week's payment to the International Monetary Fund, but investors are questioning how long it will be able to service its debt.
        "There are concerns regarding what a default means for Greek assets; investors still have a lot of exposure there," said Sireen Harajli, foreign-exchange strategist at Mizuho Bank. "That's causing a bit of a reversal we saw from last week, when the euro was stronger and the dollar weaker."
        The euro's depreciation bucked a trend over the past several weeks that has seen the common currency vault 7.1% versus the dollar since April 13. Investors have been exiting some of their short-euro bets as recent soft U.S. data have prompted some to lose faith in the U.S. economy's strength and the potential for higher borrowing costs.
        The yield on the two-year Greek bond was briefly back above 23% on Monday--more than 2.9 percentage points higher on the day--while the yield on the 10-year issue rose by about 0.8 percentage point to above 11%, before retreating slightly.
        The dollar strengthened generally against rivals. The dollar increased 0.6% against the yen, to Y120.01. The Wall Street Journal Dollar Index, which compares the dollar to a basket of widely traded currencies, rose 0.8% to 84.75, highest since May 12.
        Despite the euro's gains over the past several weeks, many investors continue to bet that a stronger U.S. economy would persuade the Federal Reserve to raise interest rates for the first time since 2006, long before the European Central Bank would pivot from easy monetary policies adopted to boost growth and consumer prices, Ms. Harajli said. The Fed has taken a cautious stance on raising interest rates as the economy has slowed since its March meeting; rising rates would make the dollar more attractive to yield-hungry investors.
        Investors on Wednesday will pore over the minutes from the Fed monetary-policy group's April 28-29 meeting, seeking more insights into the central bank's views on recent economic headwinds in the U.S.
        (END) Dow Jones Newswires

        May 18, 2015 17:50 ET (21:50 GMT)

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