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Euro falls to two and half week low

Friday, February 22 16:03:01

The euro dropped to a six-week low against the dollar today on news that euro zone banks were to repay fewer crisis loans than expected to the European Central Bank.

The ECB said banks will repay 61.1 billion euros of the second of two crisis ECB three-year loans they took a year ago.

That was the less than half the amount expected by the market, casting doubts on the health of the region's financial system.

Some investors said the data signalled some banks still felt the need to keep hold of the ultra-cheap emergency loans, and means the ECB's balance sheet will shrink at a slower pace.

"This means that the confidence is still not there and that's a negative for the euro," said Sebastien Galy, currency strategist, at Societe Generale in New York. "I don't think euro zone banks are confident that they can get cheaper loans elsewhere."

A report from the European Commission today that forecast the euro zone economy will contract again in 2013 and caution ahead of an Italian election this weekend also weighed on the euro, which fell for a third straight session. The euro fell as low as $1.3156, its lowest since Jan. 10, retreating from a session high of $1.3244 touched after a better-than-forecast German Ifo survey suggested a brighter outlook for the euro zone's largest economy.

It was last down 0.1 percent on the day at $1.3178, with market players reporting supporting bids around $1.3150-60.