By: Hillel Fuld
The EUR declined vs the USD on Tuesday as a result of concerns that euro zone policy makers will be unable to carry out a rescue opertation for Greece at a convention later in the week.
Concerns over Greek debt sustainability and the country’s inability to secure financial assistance are ensuring the EUR stay close to a three-week low. It also supported some safe-haven flows into the U.S. dollar.
Traders said the EUR pressure will maintain its level ahead of a summit of European Union leaders on Thursday and Friday.
German Chancellor Angela Merkel, who faces absolute opposition in Germany to any sort of aid or bailout of the highly indebted country, said on Monday there was no intention to discuss an aid mechanism at the EU summit.
"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 WashingtonD.C. "But for that to happen we may need to see Germany changing its stance. Until then, the pressure on the euro is still on."
The EUR has taken a nosedive of over 5 percent vs the USD since the beginning of 2010 as concern rose over the debt sustainability in Greece as well as other smaller euro zone members.
In NY morning trading, the EUR was down 0.3 percent against the dollar at $1.3517, not far from Monday's three-week low around $1.3461.
The dollar index .DXY, a measure of its performance against six other currencies, rose 0.2 percent to 80.811, edging closer toward an eight-month high of 81.342 set in February.
Greek Finance Minister George Papaconstantinou stated on Tuesday that Greece expects a European solution to its debt crisis and assumes there will be positive results from the EU summit.