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The common currency pared losses against its major counterparts after Luxembourg Finance Minister Luc Frieden said selective default on Greek debt isn’t an option “envisaged” by euro-region finance ministers and Italian government bonds reversed losses. The yen reached its strongest level against the dollar since the Group of Seven nations jointly intervened to weaken the currency.
“The story all along has been that the euro-area authorities have been doing just enough to stop the fears from being a big issue in the short term, but not enough to stop them from being a big issue in the long term,” said Paul Robinson, the global head of foreign-exchange research at Barclays Plc in London. “The perceived likelihood of something going really badly wrong in the short run has increased quite significantly.”
The euro earlier dropped to the lowest level in four months versus the yen and the dollar after a meeting of European Union finance ministers failed to defuse the region’s escalating debt crisis.
The dollar erased gains versus the pound, Canadian dollar and Swedish krona after U.S. stock markets advanced after falling as much as 0.3 percent. The Standard & Poor’s 500 Index traded 0.2 percent higher.
The U.S. currency fell for a third day versus the yen before the Federal Reserve releases minutes today from its June meeting amid signs the nation’s recovery is faltering.
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