The euro slipped against the dollar Wednesday--dropping below $1.37--as investors unsure of whether Greece would be offered help to deal with its stressed sovereign debt turned to the safety of the dollar and yen.
Euro-zone finance ministers held a conference call Wednesday with European Central Bank President Jean-Claude Trichet to discuss the Greek debt crisis amid growing speculation that a bailout is being planned.
The conference call started at 9 a.m. EST, according to European Union officials. It comes a day after Germany's leaders were reported to say they were considering helping Greece, perhaps by guaranteeing its sovereign debt or buying Greek bonds through a state-owned development bank.
"Without any positive news out of Greece, the euro will drift lower," said John McCarthy, manager of currency trading at ING Capital Markets in New York.
Wednesday morning, the euro was at $1.3681 from $1.3779 late Tuesday, according to EBS via CQG. The dollar was at Y89.73 from Y89.63, while the euro was at Y122.79 from Y123.52. The U.K. pound was at $1.5573 from $1.5700. The dollar was at CHF1.0716 from CHF1.0652.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.280 from 79.835.
A stream of conflicting news--some suggesting Germany would offer financial support to Greece and others with German government officials denying a German-led aid plan--has caused a "see-sawing of asset prices," said Sacha Tihanyi, currency strategist at Scotia Capital in Toronto, with the euro and other risk-positive assets gaining Tuesday on talk of a bailout, and the common currency dropping Wednesday as some cold water was thrown on aid reports.
"The sovereign risk time bomb that is the euro-zone periphery has been the biggest single market driver in recent sessions," Tihanyi said. "The lack of a single consistent voice to communicate to broader markets the progression of efforts to resolve the Greek issue is cause for concern as [foreign exchange] markets risk being whipsawed around further."
There is unlikely to be any decision made during the Wednesday conference call, said a senior German government official, and there is no aid for Greece on the agenda of a Thursday summit of European Union leaders, the official said.
Germany will stick to the European Union no-bailout clause and at present no EU or bilateral aid for Greece is on the meeting's agenda or is planned, the official said.
The comments came before an informal summit held by the EU in Brussels, where leaders will focus on Greece's debt crisis as part of a broader assessment of post-recession government debt levels.
"There doesn't exist any decision on such aid and it also isn't pending at present," said the senior government official at a press conference discussing the meeting scheduled for Thursday. The official added that Greece has the responsibility to deal with its budget woes.
Meanwhile, the U.K. pound was the biggest loser among major currencies Wednesday after a Bank of England official suggested the government bond-buying programs, which the bank paused last week, could be restarted if the economy needs further stimulus.
Bank of England Governor Mervyn King said at the bank's quarterly inflation report release Wednesday that it is far too soon to rule out further monetary easing through asset purchases, as the outlook for the economy remains highly uncertain.
Last week, the BOE paused its GBP200 billion quantitative-easing program, through which it has bought mostly U.K. government bonds with freshly created central bank money. It launched the plan in March last year, having slashed its key interest rate to an all-time low of 0.5%.
The U.K. pound had slipped nearly 0.9% against the dollar by morning New York trading.
Also boosting the dollar Wednesday were comments from U.S. Federal Reserve Chairman Ben Bernanke whose prepared testimony released outlined the likely path the central bank will take to tighten credit once the economy has recovered enough.
"Talk of policy normalization highlights the fact that U.S. economic conditions continue to improve and contrast the still dovish outlook to monetary policy in much of the industrialized world," said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington.