FOREX-Euro falls vs dollar






The euro fell against the dollar on Tuesday as wrangling among European Union leaders over possible support for Greece continued in the run-up to a summit later this week.

Growing concerns that EU leaders may not reach a decision this week kept the euro close to a three-week low hit on Monday and fanned risk aversion, supporting safe-haven flows into the U.S. dollar.

German Chancellor Angela Merkel, facing fierce opposition in Germany to any bailout of the highly indebted country, said there was no need to discuss an aid mechanism at an EU summit starting on Thursday.

This prompted European Commission President Jose Manuel Barroso to call on Merkel to rise above domestic politics and agree on a financial safety net for Athens or risk harm to the common currency.

"We've got a game of to-ing and fro-ing and people just want to stay away from the euro at the moment," said Geoffrey Yu, currency strategist at UBS in London.

At 0850 GMT, the euro fell 0.3 percent against the dollar EUR= to $1.3514, not far from Monday's three-week low around $1.3461, though it held above the $1.35 mark. The euro also lost 0.1 percent versus the Japanese yen EURJPY=R to 121.99 yen.

The dollar index .DXY, a measure of its performance against six other currencies, rose 0.2 percent to 80.820, edging closer towards an eight-month high of 81.342 set in February.

NO RESPITE FOR EURO

European Central Bank President Jean-Claude Trichet also took a tough line on Greece, saying aid could only take the form of a loan with strict conditions, not a subsidy. [ID:nLDE62L22T]

"This lack of action on Europe's part could well force Greece to carry out their threat to go to the IMF ... and so the internal wrangling goes on and in the meantime the euro will continue to remain under pressure," CMC Markets analyst Michael Hewson said in a note.

Against the Swiss franc, the euro was steady EURCHF= at 1.4342 francs, having earlier spiked briefly to a session high of 1.4371 after Swiss National Bank Chairman Philipp Hildebrand pledged again to counter any excessive Swiss franc rise.

"If you look at the evolution of the SNB's language it suggests they're not so worried about it (Swiss franc appreciation) any more," UBS' Yu said.

Sterling underperformed ahead of UK inflation data at 0930 GMT, falling 0.5 percent against the dollar GBP=D4 to $1.5024.

The dollar edged up 0.2 percent to 90.27 yen JPY= after dipping as far as 89.83 yen on Monday when Tokyo was shut.

However, it is roughly in the middle of an 88-92 yen trading range seen since mid-January, with prospects for U.S. rate hikes still distant after the Federal Reserve reiterated a pledge to keep rates low for an extended period, a stance reinforced by a non-voting Fed official on Tuesday.