Euro falls as doubts over bank stress tests grow

NEW YORK - The euro fell against the dollar on Friday as doubts grew that the stress tests of European banks won’t reveal the true health of financial institutions.

By (Reuters)

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Published: Fri 23 Jul 2010, 8:43 PM

Last updated: Thu 2 Apr 2015, 9:44 AM

The Committee of European Banking Supervisors said losses on sovereign debt holdings would be applied only to banks’ trading books, not their banking books.

This fed skepticism the stress tests will not shed light on banks’ capacity to withstand serious financial market turbulence.

“(There are) concerns about the credibility of the stress tests,” said Kathy Lien, director of currency research at GFT Forex in New York.

In early New York trading, the euro was down 0.4 percent at $1.2836, after hitting a session low at $1.2794 on electronic trading platform EBS.

The euro also erased gains versus the yen and was last at 112.05, flat on the day.

European Union countries asked regulators to test the bloc’s top 91 banks in a bid to help restore investor confidence in the sector’s ability to withstand future shocks without more state aid.

“The market is taking it negatively and I would have to agree if they’re only looking at losses on the trading book,” said Win Thin, senior currency strategist at Brown Brothers Harriman in New York. “It appears that the worst may be true with regards to how bonds would be subjected to testing.”

Official results of the test are due around 12:00 pm (1600 GMT).

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