FOREX-Euro recovers vs dollar as Greece seeks aid

* Euro recovers from 1-yr low vs dlr, Greece asks to tap aid

* Strong German, euro zone data helps euro recovery

* Market remains negative on euro, more losses seen

(Releads, updates throughout)

By Naomi Tajitsu

LONDON, April 23 (BestGrowthStock) – The euro pulled back from a
one-year low against the dollar on Friday as Greece gave in to
market pressure and asked to trigger an aid package from the
European Union and International Monetary Fund.

Prime Minister George Papandreou said it was imperative
Greece, whose debt problems have weighed on the euro all year,
seek to activate the aid mechanism. [ID:nATH005401]

The euro was last at $1.3308, up 0.1 percent on the day.

It hit a one-year low of $1.3201 earlier in the session,
hammered after a downgrade of Greece’s sovereign rating on
Thursday piled pressure on Athens to tap the aid, worth 40-45
billion euros.

Faith in Greece’s ability to service its debts has gradually
evaporated this week, pushing the cost of insuring against a
debt default to a record high and widening spreads between Greek
and German government debt yields to levels not seen for at
least 12 years.

“There’s a lot of fear in the market, so if indeed they
reach some sort of solution it will be near-term supportive for
euro sentiment,” said Valentin Marinov, currency strategist at
Societe Generale.

He said the euro may jump as high as $1.3415 in a knee-jerk
reaction to any announcement of imminent help for Greece, but
added that any corrective rally would be fleeting.

“We still don’t know what the IMF would require for its
participation in an aid package … there’s still some
uncertainty (surrounding the issue).”

The euro also recovered from early losses against the yen
and traded little changed on the day at 124.30.

Citing a risk of higher Greek debt yields, Moody’s Investors
Service on Thursday cut Greece’s rating by one notch to A3,
placing it four notches above “junk status”. [ID:nLDE63L0SF]

Greece’s debt problems have emphasised the weak fiscal
positions of other euro zone countries, leaving some investors
questioning the stability of the 16-nation currency bloc.

The single currency has fallen more than 1 percent against
the dollar so far this week, hit a three-month low against
sterling, and tumbled to its weakest versus the Canadian dollar
since mid-2001.

Worries about Greece have stung demand for risky assets and
boosted the dollar, considered a safe bet in uncertain times.
Against a currency basket (.DXY: ), the greenback hit a one-month
high of 82.074 before pulling back to 81.620.


A surge in German business morale this month to its highest
in nearly two years also helped the euro, as did a bigger-than-
expected jump in euro zone industrial new orders in February.
[ID:nBAE003774] [ID:nLDE63M0M0]

But analysts said the market would be primarily driven by
fallout from the Greek crisis.

“It’s not economic fundamentals but the euro zone
peripheries, especially Greece, that’s going to weigh on the
market,” said Ian Stannard, currency strategist at BNP Paribas.

Analysts said revised data on Greece’s 2009 budget deficit
released on Thursday indicating the shortfall was wider than
first thought, suggested Greece may face an even harder time
consolidating its debts. [ID:nLDE63L12B]

Forecasters in a Reuters poll, issued before Greece said it
would seek to trigger the aid mechanism, saw a roughly one-in-
four chance the country would default on its debt in the next
five years. [ID:nLDE63J232]

The Australian dollar fell as much as 1 percent to $0.9184
(AUD=D4: ) after the head of the Reserve Bank of Australia said
interest rates were moving close to “average”. [ID:nSYA008239]

Finance ministers from the Group of 20 economic powers began
talks in Washington on Thursday, where they were expected to
discuss ways to reform the financial sector. [ID:nN22159790]

Stock Market Research

(Additional reporting by Tamawa Desai, editing by Nigel

FOREX-Euro recovers vs dollar as Greece seeks aid