The euro fell against the U.S. dollar on Friday on fresh fears of a Greek debt default and worries about the economic recovery globally undermined commodity prices and depressed stocks. U.S. stocks were dragged down by declines in energy and commodity-related shares, though copper prices jumped on a decline in Chinese inventories.
A report saying Norway suspended the payment of a $42 million grant to Greece for failure to comply with its EU-IMF bailout plan commitments started a sell-off in the euro. Speculation mounted that Finland, a European Union member, would do the same. For details see [ID:nOSL016301].
International Monetary Fund may also have suspended its review of Greece, which could mean a delay in the disbursement of much-needed funds for Athens, according to some reports.
Fitch rating agency further downgraded Greece's credit, increasing the euro's decline. [ID:nLDE74J1K7] The euro was down 0.8 percent at $1.4198 on trading platform EBS after four days of gains, with investors focused on the $1.40 level as a short-term target.
The news about problems with the EU-IMF Greek bailout plan almost overshadowed anxiety over Spain's upcoming regional election this weekend. Spanish bond yields rose on concern the vote results may undermine Prime Minister Rodrigo Zapatero's ability to curb Spain's own fiscal deficit.
"The news has been tough all day for the euro. People were starting to buy the euro the last few days and then we got all these news and then the euro just gave way," said Richard Franulovich, senior currency strategist, at Westpac in New York. The U.S. dollar index <.DXY>, a gauge of the greenback against a basket of currencies, rose 0.75 percent. On Wall Street, commodity shares were the hardest hit, though some retailers weakened also.
"It's all about the euro," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. "Commodity stocks aren't doing well. But keep in mind, your other problem out there is that as the dollar strengthens, your multinational dollar-sensitive, large cyclical companies go down also."
The Dow Jones industrial average <.DJI> dropped 56.19 points, or 0.45 percent, to 12,549.13. The Standard & Poor's 500 <.SPX> fell 5.48 points, or 0.41 percent, to 1,338.12. The Nasdaq Composite <.IXIC> lost 13.61 points, or 0.48 percent, to 2,809.70.
World stocks as measured by MSCI <.MIWD00000PUS> were down 0.3 percent. Copper prices jumped, with three month copper up almost 2.0 percent as investors focused on a decline in stockpiles in top consumer China.
Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 14.6 percent from last Friday, the exchange said. [ID:nEMS011047]. U.S. light crude futures bounced back from a 2.0 percent decline to gain 0.4 percent at $98.85 before their contract expiry later on Friday. Brent crude was up 0.5 percent near $112 a barrel. --- read more