March 23, 2010 / 5:51 PM / 10 years ago

FOREX-Euro falls vs dollar on nagging Greece worries

* Euro falls ahead of EU summit on aid for Greece

* Euro risks further fall if summit offers no concrete aid

* Euro hits record low vs Swiss franc (Recasts; updates prices, adds quote)

NEW YORK, March 23 (Reuters) - The euro slipped against the dollar on Tuesday as investors worried that euro zone policy makers are unlikely to provide a rescue package for Greece at a summit later this week.

Worries over Greece’s ability to win financial aid to help repay debt kept the euro close to a three-week low, which supported some safe-haven flows into the U.S. dollar.

Disenchantment with the European single currency was compounded by its decline to an all-time low against the Swiss franc.

Failure to reach a quick resolution over Greece, combined with lackluster euro zone economic growth, could prevent the European Central Bank from raising interest rates until well into next year and add to selling pressure.

Traders said pressure on the euro will continue ahead of the summit of European Union leaders on Thursday and Friday.

“The risk is for further weakness in the euro if nothing concrete comes out of this summit in terms of financial help to Greece,” said Joe Manimbo, a currency trader at Travelex Global Business Payments, in Washington D.C.

German Chancellor Angela Merkel said Germany would only agree financial aid for Greece as a last resort if Athens was unable to raise funds on capital markets, sources from her conservative bloc told Reuters on Tuesday. For full story, see [ID:nBAT005261]

Merkel also said that Germany would only agree to a model of aid to Greece combining bilateral and International Monetary Fund contributions.

In mid-afternoon trading in New York, the euro was down 0.3 percent against the dollar EUR= at $1.3516, after trading as low as $1.3477 earlier. The single currency hit a three-week low at $1.3461 on Monday, according to Reuters data.

OVERDONE

A report in the United States showing sales of previously owned homes fell less than expected in February gave a boost to risk sentiment and took some of the selling pressure off the euro. [ID:nN23249604].

Some analysts said the euro’s 5.5 percent drop against the dollar since the start of the year may be overdone.

The housing data “gives a bit of a boost to the euro based on improved risk sentiment,” said Brian Dolan, chief currency strategist, at Forex.com, in Bedminster, New Jersey.

The euro fell to a record low against the Swiss franc. The low was recorded at 1.4271 francs EURCHF=, according to Reuters data and 1.4270 francs on electronic trading platform EBS. The euro was last down 0.5 percent at 1.4272 francs.

The Swiss National Bank has been intervening in forex markets over the past year as part of its efforts to protect the Swiss economy and traders are watching for indications of just how much the central bank will allow the currency to climb.

A spokesman for the Swiss National Bank declined to comment on the move.

NO RESPITE FOR EURO

Greek Finance Minister George Papaconstantinou said on Tuesday that Greece wants a European solution to its debt crisis and expects positive results from the EU summit. [ID:nATH005305]

But European Central Bank vice-president nominee Vitor Constancio added fuel to the fire, saying IMF loans would not be enough to satisfy Greek needs [ID:nWLB0642].

“I expect a test of this year’s low at $1.3435, and if that breaks, a quick move toward $1.3100,” said Ian Stannard, senior currency strategist at BNP Paribas in London. (Reporting by Nick Olivari and Vivianne Rodrigues; Additional reporting by Naomi Tajitsu in London; Editing by Leslie Adler)

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