MW: Dollar slightly lower versus euro as Greek worries ease
By William L. Watts & Lisa Twaronite, MarketWatch
LONDON (MarketWatch) -- The U.S. dollar lost some ground versus the European single currency Tuesday as tensions surrounding Greece's fiscal problems faded, at least for now, analysts said.
The euro (CUR_EURUSD 1.39, +0.00, +0.04%) traded at $1.3954 versus the dollar, up from $1.3929 in North American activity late Monday.
The euro had tumbled to a seven-month low versus the dollar last week as Greek bond yields soared in reaction to concerns about Athens' ability to meet its financing needs and to put its budget in order. Yield spreads versus German government bonds have narrowed this week.
"Without doubt [European monetary union] faces further significant hurdles this year in view of the budget problems of Greece, Spain and Portugal, but for now the market is coming to terms with the notion that the system will be maintained intact and that the higher yields of these countries may thus offer good value," said Jane Foley, research director at Forex.com.
The European Commission, the executive arm of the European Union, is set Wednesday to decide whether to formally expect Greece's budget plan. Greece aims to slash the deficit from a level equal to nearly 13% of gross domestic product last year to less than 3% -- the E.U. limit -- by 2012.
Brussels is expected to largely accept the plan after a spokeswoman on Monday said the goals appeared achievable but were subject to risks.
The lower-yielding U.S. dollar and yen both got a lift in Asian trading after the Reserve Bank of Australia surprised markets by holding its policy rate unchanged, but later gave up some of those gains.
The RBA left its key rate at 3.75% after a string of increases at its previous three meetings. Analysts had widely expected a rate increase of 25 basis points to 4.0%. See full story on Reserve Bank of Australia rate decision.
The Australia dollar fell immediately following the decision. It traded at 88.22 U.S. cents in recent action, down from 89.22 U.S. cents before the announcement, and off 1% from the previous session.
The dollar index (DXY 79.09, -0.15, -0.19%) , which tracks the greenback against a trade-weighted basket of six major currencies, fell to 79.154, from 79.229 in late Monday's North American trading.
