Euro plummets against the Dollar as the EU rejects calls to aid Eastern Europe

The euro fell to a one-week low against the dollar after European Union leaders rejected calls to back an aid package for eastern Europe, fueling concern the financial crisis will deepen the region’s recession. Europe’s single currency dropped for a second day versus the greenback as EU leaders vetoed Hungary’s proposals for 180 billion Euros ($227 billion) of loans to ex-communist economies in Eastern Europe. “There’s disappointment that nothing really concrete came out of the EU’s weekend meeting and their failure to address Eastern Europe’s problems,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The bias is for the euro to be sold.” The EUR/USD is currently trading at $1.2580 as of 8:35am, GMT.

The dollar’s 9 percent rally against the yen in the past month may stall at so-called resistance at 98.89. The dollar traded at 97.41 yen as of 6:45 a.m. in London from 97.57 yen late yesterday in New York on Feb. 27 when it touched 98.61, near 98.71 reached on Feb. 26, the highest level since Nov. 10. In the next two weeks the greenback may fall to 94.63 yen, the Jan. 6 high and a previous resistance level. After a currency breaks above resistance, the resistance which had been broken can become support, based on technical analysis. Support is where buy orders are clustered. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. The USD/JPY is currently trading at 97.50 as of 8:50am, GMT.

American International Group Inc., the insurer deemed too important to fail, may get as much as $30 billion in new capital and have debts to the U.S. forgiven in the firm’s third bailout, people familiar with the matter said. AIG agreed to give stakes in its two biggest international life insurance divisions to the government to erase some of the New York-based firm’s approximately $37 billion in debt, said three people, who declined to be named because the plan hasn’t been announced yet. AIG may post a record fourth-quarter loss of about $60 billion, the people said. “The government has accepted all the downside with little chance of upside,” said Phillip Phan, professor of management at the Johns Hopkins Carey Business School in Baltimore. “They are trying to protect the global financial system from a complete meltdown.”

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