The euro erased its gain versus the dollar and fell below $1.43 for the first time in more than two weeks as Standard and Poor's reduction in Greece's credit rating renewed concern the region's debt crisis is worsening.
The 17-nation currency rose earlier as a report showed exports in Germany, Europe's largest economy, jumped in March, bolstering the case for higher interest rates in the euro region.
The pound depreciated after the Confederation of British Industry lowered its economic growth predictions and a report showed house prices unexpectedly fell.
"The S&P downgrade is just rubbing salt in a wound and confirmed everyone's suspicions that Greece is essentially in a quasi default state," said Boris Schlossberg, director of research at the online currency trader GFT Forex in New York. "You are still seeing some relatively good data out of the euro zone, so we are living in a bifurcated world."
The euro decreased 0.2 per cent to $1.4290 at 10.13am in New York, compared with $1.4316 on May 6th, after touching $1.4273, the lowest level since April 19th. The currency earlier rose 0.9 per cent to $1.4442. The euro traded at 115.33 yen, compared with 115.44, after earlier rising 0.9 per cent to 116.48.
The dollar fetched 80.71 yen, compared with 80.63.
Futures traders increased their bets that the euro will gain against the US dollar as of May 3rd, figures from the Washington-based Commodity Futures Trading Commission show. Net longs increased to 99,516 last week, the most since 2007, compared with 68,279 a week earlier.
Greece's credit rating was cut to B from BB- by S&P, which said further reductions are possible, with private investors at risk if maturities are extended on the nation's emergency-aid package. Another rating cut would make Greece the lowest-rated country in Europe as today's move left it even with Belarus after the fourth reduction by SandP since April 2010.
"It raises the stakes just that little bit more, in view of the ongoing debate on how Greece is going to deal with its ongoing problems," said Jeremy Stretch, executive director of foreign- exchange strategy at Canadian Imperial Bank of Commerce in London. "It's another short-term headwind for the euro to take onboard. International investors sitting on the outside looking in probably regard it as another reason to fight shy of the euro."
Bloomberg
