The euro fell against the dollar Wednesday after the European Central Bank said it would no longer accept Greek public securities as collateral for central bank loans.
The euro recently traded down 0.8% at $1.1387, compared to around $1.1425 before the statement.
The move raises pressure on the new Greek government to come to terms with its international creditors on the country's bailout program, market watchers said. It also increases uncertainty surrounding negotiations between Greece and its creditors, a negative for the euro, analysts said.
"It shows that the ECB is playing hardball," said Win Thin, a strategist at Brown Brother Harriman. "They will likely reach a compromise, but there will be plenty of hiccups in between."
Because Greek government bonds are junk rated, and thus below the ECB's minimum threshold, Greek banks have relied on the waiver to post collateral for cheap ECB financing through the central bank's regular facilities.
Greek banks will still have access to funds through the ECB's emergency lending program. Under that facility, the credit risk of the loans stays on the books of the Greek central bank and the loans carry a higher interest rate.
The ECB's statement "turns up the pressure on the new Greek government to toe the line and accept responsibilities on the terms of repaying its debt," said Shaun Osborne, chief currency strategist at TD Securities.
-- Brian Blackstone contributed to this article.
-- Write to Ira Iosebashvili at ira.iosebashvili@wsj.com and James Ramage at james.ramage@wsj.com
(END) Dow Jones Newswires
February 04, 2015 16:22 ET (21:22 GMT)
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