Euro Declines Amid Speculation EU Plan for Greece May Falter

London - The euro declined for a third day against the dollar amid speculation that a plan for Greece to obtain European Union and International Monetary Fund help in cutting its budget deficit may falter. Europe’s common currency also dropped versus the yen as Market News International reported that Greece wants to bypass IMF involvement should it require assistance because the conditions would be too stringent. The Australian dollar advanced after the central bank raised interest rates for the fifth time in six meetings. The report that Greece “isn’t keen on the IMF being involved in any bailout would seem to throw the whole plan into question,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “As an investor, do you really want to hang around and see what’s happening next? The Greece story is definitely a negative for the euro.” Europe’s common currency weakened to $1.3415 as of 8:44 a.m. in London, from $1.3484 in New York yesterday. The euro slid to 125.82 yen, from 127.25. The yen strengthened to 93.79 per dollar, from 94.37 yesterday, when it traded at 94.79, the weakest level since Aug. 24. Greece has been receiving information from the IMF about the conditions it would impose in return for aid and government officials found them to be “tough,” and are concerned that they could result in civil unrest, Market News said, citing officials it did not identify. Any package would “be an IMF program decided by the IMF as it happens with each and every country,” IMF Managing Director Dominique Strauss-Kahn said last week. Dollar Bonds The euro has weakened 5.5 percent against the yen and 6.4 percent versus the dollar this year on concern Greece will struggle to redress its fiscal shortfall. Greece needs to borrow 32 billion euros ($43 billion) this year, Petros Christodoulou, director general of the Public Debt Management Agency, said March 31 in a Bloomberg Television interview. The nation may issue between $5 billion and $10 billion in dollar bonds, the Wall Street Journal reported then, citing a Greek government official it didn’t identify. The yen gained for a second day against the dollar on speculation exporters took advantage of the Japanese currency’s slide to bring back overseas earnings. Japan’s large manufacturers expect the yen to average 91 per dollar this fiscal year, according to the Bank of Japan’s most recent Tankan survey. A weaker yen increases the competitiveness of Japanese goods overseas and boosts the value of revenue earned abroad. ‘Hawkish’ RBA “Japanese exporters are likely buying the yen,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore, “They should be quite happy with the current level.” The Australian currency rose to the highest since March 17 against the dollar after the central bank raised the main interest rate to 4.25 percent and said borrowing costs need to be “closer to average,” amid an expanding domestic economy and growth in Asia. The currency traded at 92.44 U.S. cents, from 91.85 cents before the decision and 92.14 cents yesterday. “The statement is still somewhat hawkish as it’s talking about continuing to move rates to average,” said Amy Auster, head of foreign-exchange and international economics research at Australia & New Zealand Banking Group Ltd. in Melbourne. “They’re now fairly confident that growth in Australia at least is going to be trend or potentially above trend.” Relative Strength Gains in Japan’s currency were limited as Pacific Investment Management Co., which runs the world’s biggest mutual fund, said investors should hold fewer euros, British pounds and yen. Pimco favors currencies in China, Brazil, Canada and Australia, which deliver attractive returns amid uneven global economic growth. “We continue to expect a ‘desynchronized’ recovery, with less leveraged emerging economies likely to grow more robustly than the developed economies,” fund manager Paul McCulley, based at the company’s main office in Newport Beach, California, wrote on the company’s Web site. Malaysia’s ringgit and the Philippine peso led gains in Asia on mounting speculation China will let the yuan appreciate, making goods imported from regional peers cheaper. The Bloomberg-JPMorgan Asia Dollar Index rose to a 19-month high. Yuan Forwards Chinese yuan forwards rose to the strongest level in more than 10 weeks on speculation the U.S. decision to delay a report on global foreign-exchange policies will make China more willing to let the currency resume appreciation. Treasury Secretary Timothy F. Geithner three days ago announced the postponement of the April 15 deadline for the annual review, which may have resulted in China being labeled a currency manipulator. Twelve-month non-deliverable forwards advanced to as much as 6.6145, the strongest level since Jan. 20. “Clearly the market is seeing this as giving China a window of opportunity to move its currency,” said Thomas Harr, a senior foreign-exchange strategist at Standard Chartered Plc in Singapore. “We will likely see more volatility in the central parity rate in May or June, and then you will see more clear depegging in the late second quarter or the beginning of the third quarter.”