Euro weakens after possible delay of Greek bailout

NEW YORK: The euro slid to its lowest in more than a week against the dollar on Wednesday after euro zone officials said a proposal was being considered to delay all or part of Greece's bailout while avoiding a chaotic default.

European Union sources said the delay may last until after Greece holds elections in April. The news triggered stop-loss sell orders on the break of $1.31 and below 102.82 yen.

"The brinksmanship among creditors, euro zone officials, and Greece is weighing on the euro," said Mark McCormick, currency strategist at Brown Brothers Harriman in New York. He added that the proposed delay in the Greece's rescue package until after the April elections could be problematic because of bond redemptions in March.

"The EU may have to provide bridge loan for Greece to avoid a default," McCormick said.

The latest Greek headlines overshadowed news China would continue investing in euro zone debt and pledges from Greek Conservative party leader Antonis Samaras to commit to tough austerity measures.

In early New York trading, the euro was down 0.3 percent at $1.30850, falling as low as $1.30668 on trading platform EBS, its lowest since February 6.

Traders cited key support at $1.3026/27 Feb 1 and Feb 6 lows on EBS. Psychological support was at $1.30.

Against the yen, the euro fell from roughly two-month highs at 103.490 yen after the Greek news and was last at 102.544, down 0.4 percent.

Earlier in the session, data showed a contraction in the euro zone's quarterly GDP, adding to concerns the currency bloc could slip into recession.

Euro zone economic output shrank by 0.3 percent in the fourth quarter of 2011, as forecast. The data had limited impact on the euro but analysts said weak European growth could weigh on the currency versus the dollar in the medium term as the US economic picture improves.

The dollar, meanwhile, slipped against the yen to trade 0.1 percent lower at 78.390. Monetary easing steps from the Bank of Japan on Tuesday had weighed on the Japanese currency and earlier pushed the dollar to a 3-1/2 month high of 78.67 yen.

The greenback, however, was well above strong support at its 200-day moving average, currently around 78.04 yen, having closed above it for the first time since mid-April. Tough resistance was seen at the post-intervention high of 79.55 yen.