Euro recovers from 4-year low against dollar

NEW YORK (AP) - The euro recovered from a four-year low against the dollar Wednesday as the European Commission urged coordinated European action after Germany moved on its own to restrict trading of financial stocks and euro countries' government debt.

The euro first broke through an April 2006 low last Friday. It has been weakening all year, but its decline accelerated after a nearly $1 trillion emergency financing package for indebted euro countries was approved in early May.

The spending cuts and higher taxes in European countries required for the aid drove experts to temper their expectations for the European economies. Unexpected changes in policy for financial markets by European politicians and central bankers has also contributed to uncertainty, said CMC Markets analyst Michael Hewson.

The 16-nation euro rose to $1.2316 Wednesday morning in New York, up from $1.2176 in New York on Tuesday. In Asian trading late Tuesday night, the euro fell as low as $1.2146, its weakest point since April 2006.

The euro has dropped more than 11 cents in May, its biggest monthly decline since the aftermath of the collapse of Lehman Brothers.

Germany's financial regulator BaFin announced its ban on "naked" short selling of big financial companies and euro countries' sovereign debt late Tuesday, a move it said was aimed at upholding financial stability amid persistent volatility sparked by the Greek debt crisis.

In naked short-selling, traders sell shares or investments they do not own without first making arrangements to borrow them.

Hewson said similar trading restrictions on financial stocks by U.S. and U.K. authorities in the fall of 2008, during the height of the financial crisis, "exacerbated market declines and volatility, as investors took fright and bailed out of the whole sector, and the Germans run the risk of causing the same mayhem."

EU Internal Market Commissioner Michel Barnier said finance ministers from the common currency's other members, who are meeting in Brussels on Friday, should coordinate regulatory efforts. "These measures will be even more efficient if they are coordinated at a European level," he said.

Germany's move was unexpected, and market participants are concerned that policy in Europe will take other surprising turns, said UBS analyst Geoffrey Kendrick.

The British pound rose Wednesday to $1.4327 from $1.4316 while the dollar declined to 91.88 Japanese yen from 92.29 yen.

The dollar soared versus currencies of big exporters of oil, gas, metals and agricultural goods such as Australia, New Zealand and Brazil, due to worries about China, one of the world's biggest consumer of commodities.

Chinese stocks have plunged because of rising inflation in the Asian powerhouse and because of concern that a slowdown in Europe would hit China's economy.

In other trading Wednesday morning, the dollar edged up to 1.0419 Canadian dollars from 1.0410 Canadian dollars, and ticked higher to 1.1515 Swiss francs from 1.1510 francs.