Doubts over Ireland package pull euro down

Singapore: The euro traded near a seven-week low amid concern a failure to craft a rescue package for Ireland will allow the nation's banking crisis to spread.

The dollar held near a six-week high against the yen after Atlanta Federal Reserve President Dennis Lockhart said additional bond purchases by the central bank aren't intended to weaken the greenback. The Australian and New Zealand dollars traded near the lowest levels in more than two weeks as declines in stocks and concerns China will take measures to cool inflation damped demand for higher-yielding assets. The euro snapped a two-day slide against the yen.

"Attention has shifted from the US to concerns about Europe's debt issues, which are being used as an excuse to unwind short positions on the dollar," said Keiji Matsumoto, a currency strategist in Tokyo at Nikko Cordial Securities Inc. "Concerns about Europe's debt issues will be around with us at least till the end of this year."

The euro was at $1.3495 as of 6.35am in London from $1.3489 in New York on Tuesday, when it touched $1.3448, the weakest level since September 28. The shared currency traded at 112.59 yen from 112.38 yen after dropping 0.4 per cent on Tuesday. The greenback fetched 83.42 yen from 83.29 yen. On Tuesday, it reached 83.59 yen, the highest level since October 5.

Ireland is negotiating with the European Union and International Monetary Fund about aid to shore up the state's finances, furnish capital for the country's banks and spare it from tapping the bond market for an extended period, a European official said on condition of anonymity.

European Union Econ-omic and Monetary Affairs Commissioner Olli Rehn said on Tuesday Ireland's banking problems are "spilling over to the sovereign".

Irish Prime Minister Brian Cowen told Parliament in Dublin the nation hasn't lodged an aid request and the goal is "a credible, efficient and above all workable solution that will provide assurance to the markets."

"Investors are poised to unwind their positions rather than adding new ones amid Europe's lingering issues, and the bias is for the dollar to be bought," said Kuniyuki Hirai, manager of foreign-exchange trading at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest lender. "The euro will struggle to rise toward year-end."

Austrian Finance Minister Josef Proell said he's considering withholding his country's share of the next part of Greece's 110 billion-euro (Dh545.11 billion) rescue, saying the Athens government missed a revenue-raising target. Greece's near-default in May triggered Europe's sovereign-debt crisis.