The euro pared losses against the U.S. dollar on Monday, as concerns eased over debt crisis, after eurozone’s official agreed to increase the bailout package for the region.
EUR/USD recovered losses to hit 1.4306 during early New York trading, from the day's low of 1.4192.
Jean-Claude Juncker, head of the Eurogroup of finance ministers, said the European Financial Stability Facility (EFSF) effective lending capacity will be increased to EUR 780 billion from EUR 440 billion.
The euro weakened broadly earlier, as risk aversion intensified following the eurozone leaders' decision to delay emergency loans to Greece.
The finance ministers of the 17-naton eurozone, who met on Sunday in Luxembourg to discuss aid to the debt-hit Greece, postponed a decision on a new bailout for the country to early July. They also said that bailout will be subject to Greece’s parliament passing new austerity package on Tuesday.
The required additional funding for Greece will be financed through both official and private sources and [Ministers] welcome the pursuit of voluntary private sector involvement in the form of informal and voluntary roll-overs of existing Greek debt at maturity for a substantial reduction of the required year-by-year funding within the programme, while avoiding a selective default for Greece,” a joint statement signed by the ministers said.
“On these conditions, ministers decided to define by early July the main parameters of a clear new financing strategy,” it said.
Also, traders expect Fed’s policy meeting later this week to lend support to the single currency in the near-term.
“We do not expect any meaningful changes, though the economic backdrop will be marked to market. Language regarding policy will only be tweaked slightly, noting the completion of QE2 and continuation of the reinvestment program in the near-term, and as past releases lead us to expect, any further reinvestment details will be released after the FOMC meeting,” said a note from RBC Capital Markets.
The single currency also trimmed losses against the British pound, with EUR/GBP trading at 0.8862, down 0.13 percent.