The euro sank to a 13-month low Tuesday against the dollar as concerns about debt problems in Europe weighed on markets despite a massive bailout for Greece. The U.S. currency rose broadly as stocks and commodity prices tumbled.
In late morning trading in New York, the euro sank as low as $1.3023, its weakest point since April 2009. Late on Monday, it was worth $1.3212. Last November, before markets realized the extent of Greece's debt problems, it bought more than $1.51.
The euro has lost favor as European governments have scrambled to find a solution to prevent Greece from defaulting on its debts. A euro110 billion ($144 billion) aid package is now in the works. Germany, which will bear a lion's share of the load, is expected to approve it in parliament by the end of the week. The 15 other euro countries and the International Monetary Fund scrambled to bail out Greece as borrowing costs soared for indebted European countries.
But investors remain worried about Europe's ability to shoulder aid for other countries that may need help, such as Portugal. Borrowing costs for other indebted countries also remain high, said Brown Brothers Harriman currency analyst Win Thin.
"Markets are telling us that the aid package has not lessened default risk by any significant amount," Thin said.
Analysts don't see an end to the euro's fall. UBS AG, which had a three-month price target of $1.30, says its euro forecast is under review. Morgan Stanley, which has a euro forecast of $1.24 by the end of the year, is considering lowering its target.
"There's no easy way to fix the debt problem in Europe," said Morgan Stanley currency strategist Ron Leven. "It's very difficult to see how Greece can dig itself out of its debt problem." There may have to be a restructuring of Greece's debt beyond the bailout, he said. European banks, which are big holders of Greek bonds, would take a big hit.
In other trading, the British pound fell to $1.5122 from $1.5258 ahead of a general election Thursday that could result in a parliament without a majority party in charge. Analysts say that could make it difficult to improve the U.K.'s own budget problems.
The dollar rose to 1.0991 Swiss francs from 1.0846 francs and soared to 1.0232 Canadian dollars from 1.0103 Canadian dollars. The dollar rose against the New Zealand and Australian dollars, the Nordic currencies and most emerging-market currencies in Latin America and Asia.
Currencies of big commodity exporters such as Brazil, Australia and Canada were particularly hard-hit as the price of oil, metals and agricultural commodities slid.
The dollar edged lower to 94.47 Japanese yen from 94.59 yen late Monday.
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