G7 talks on Greece fail to soothe investors; euro dips

The euro and growth-linked currencies fell yesterday as investors unwound risky trades amid growing worries about eurozone's debt problems, dismissing assurances from European finance ministers at the weekend.

European ministers told their counterparts at a Group of Seven meeting on Saturday they would make sure Greece sticks to its budget-cutting plan. But analysts said Europe needs to go beyond words to restore confidence among investors worried that problems in Greece, Portugal and other weaker eurozone states could upset or derail the global economic recovery.

"What I think is needed is an agreement on behalf of the EU to provide further support for Greece to further ensure that it doesn't default," said Michael Woolfolk, senior currency analyst at Bank of New York Mellon.

The euro fell 0.3 per cent from late US Friday levels to $1.3636, edging back towards an eight-month low hit on Friday. The single currency has shed about 10 per cent from a 15-month high of $1.5145 in late November.

Growing eurozone problems also soured the appetite for currencies such as the New Zealand dollar and the Australian dollar, which are dependant on global economic growth. The NZD fell to a low of $0.6857, just off $0.6807 struck in Friday's offshore trade, its lowest since September 4.

Japan's Nikkei average fell below the 10,000 mark, hovering just above the crucial 200-day moving average, as exporters such as Sony were clobbered by a strong yen, which has climbed to multi-month peaks against currencies like the Australian dollar and the sterling. The yen, traditionally seen as a safe haven in times of market turmoil, has gained four per cent against the dollar so far this year as investors fretted about the sustainability of the global recovery.

 

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