The 17-nation currency pared losses against its major counterparts after Luxembourg Finance Minister Luc Frieden said selective default on Greek debt isn’t an option “envisaged” by euro-region finance ministers and Italian government bonds reversed losses. The yen reached its strongest level against the dollar since the Group of Seven nations jointly intervened to weaken the currency.
The euro earlier dropped to the lowest level in four months versus the yen and the dollar after a meeting of European Union finance ministers failed to defuse the region’s escalating debt crisis.
The dollar erased gains versus the pound, Canadian dollar and Swedish krona after U.S. stock markets advanced after falling as much as 0.3 percent. The Standard & Poor’s 500 Index traded 0.2 percent higher.
The U.S. currency fell for a third day versus the yen before the Federal Reserve releases minutes today from its June meeting amid signs the nation’s recovery is faltering.
Minutes outline possible exit procedures but immediately backtrack by saying Fed is "prepared to make adjustments to its exit strategy if necessary in light of economic and financial developments" - and indeed key data has weakened since the meeting. Bernanke's testimony Wed-Thur should explain this; note that prior released central-tends already showed weaker outlook.