Forex Market Review – Euro down after Merkel refuses to renegotiate Greece bailout terms

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Euro extended its decline against the dollar during the U.S. session as market focus shifted back to deeper euro zone debt problems. After a brief relief following Greek election results on Sunday, the New Democracy party still has to form a coalition government. Apart from Greece, concerns grew regarding Spain’s burgeoning debt as Spanish bond yields reached record highs today, passing the 7 percent level considered to be unsustainable in the long term.

What further dragged euro down were comments from German Chancellor Angela Merkel, saying that she rejected any loosening in the terms of Greece’s bailout terms. Merkel also said she does not see any reason to speak about a fresh aid package for Greece on top of the two bailout deals earlier.

EURUSD fell to a new session low of 1.2556, down over 1 percent from the day high.

Sterling fell as risk aversion gave the dollar strength. GBPUSD touched a low of 1.5635.

USDJPY traded lower in the New York session compared to the start of the day, touching as low as 78.85. Safe haven demand helped yen strengthen. EURJPY fell 1 percent on the day to 99.10.

The Canadian dollar dropped against the greenback to 97.30 US cents as crude oil fell by over US$3 to US$82.03 a barrel. Oil is a major Canadian export and so its price affects the commodity-linked CAD.

The Dow Jones industrial average  was down over 20 points during New York trading.