Euro Declines Amid Renewed Greek Default Concerns

The euro weakened for a third day against the dollar, touching the lowest in almost three weeks, as concern the currency region’s rescue plan will crumble and the European Central Bank will cut interest rates damped demand.

The 17-nation currency fell the most in two weeks versus the yen after Greek Prime Minister George Papandreou pledged to put the European Union’s latest accord to a referendum, risking pushing the country into default if rejected by voters. The dollar and yen strengthened as stocks slid around the world and data showed Chinese manufacturing slowed.

“The motivation for this referendum is anyone’s guess, but it definitely raises the level of uncertainty going forward,” said Brian Kim, a currency strategist in Stamford, Connecticut, at Royal Bank of Scotland Group Plc. “Uncertainty is not good at this point. The dollar has been a beneficiary, since you’re seeing risk off across the board.”

The euro dropped 0.8 percent to $1.3742 at 2:16 p.m. in New York after falling 1.8 percent earlier to $1.3609, the weakest since Oct. 12. The shared currency slipped 0.6 percent to 107.66 yen, after losing as much as 1.7 percent, the biggest intraday drop since Oct. 17. The dollar rose 0.2 percent to 78.32 yen after touching 79.53 yesterday, the strongest since Aug. 4.

The euro pared losses against the dollar and yen as stocks trimmed a retreat after Dow Jones Newswires reported a Greek Socialist Party official said Papandreou’s call for a referendum is “basically dead.”

The Dollar Index, which IntercontinentalExchange Inc. uses to track the U.S. currency against those of six trading partners, gained for a third day, rising 0.8 percent to 77.090.