The Euro Declines as IMF discusses aid to 10 eastern European countries

The euro declined against the yen and the Dollar, after Handelsblatt reported the International Monetary Fund is discussing aid programs with at least 10 Eastern European governments. Europe’s currency weakened versus most of its major counterparts after the German newspaper cited unidentified IMF officials as saying the countries applying for loans for the first time included Bulgaria, Croatia and Macedonia. “People are still cautious about the sustainability of a recovery,” said Takao Yahata, in Tokyo at Mitsubishi UFJ Trust and Banking Corp “As risk-aversion resurfaced, buying- back of the yen against higher-yielding currencies may continue.” The EUR/USD is currently trading at $1.3920 as of 8:49am, London Time.

The British Pound gained against the greenback and euro on Thursday after the Bank of England kept its quantitative easing target unchanged at a £1.25Bln, surprising markets which had expected an expansion of the scheme. The BoE said it would review the programme in August, when it releases its quarterly Inflation Report and make further decisions then. "Unless we see some really bad forecasts in the Inflation Report, the MPC might not continue with QE at all," said George Buckley, UK economist at Deutsche Bank. Data on Thursday showed Britain's trade deficit narrowed to 6.263 billion pounds in May from 7.137 billion in April. The GBP/USD is currently trading at $1.6275 as of 8:55am, London Time.

The U.S. dollar will remain the world’s main reserve currency, White House Press Secretary Robert Gibbs said at the Group of Eight summit today. “Despite whatever talk you might have heard, I don’t see that there is movement away from the notion of the dollar being that currency,” Gibbs told reporters at a briefing in Italy. Russian President Dmitry Medvedev and other emerging-market leaders have suggested alternative reserve currencies in a bid to reduce exposure to the dollar. Gibbs said the subject didn’t come up during the Obama-Lula talks.

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