March 2 (Bloomberg) -- The euro fell to a one-week low against the dollar after European Union leaders rejected calls to back an aid package for eastern Europe, fueling concern the financial crisis will deepen the 16-nation region's recession.Europe's single currency dropped for a second day versus the greenback as EU leaders vetoed Hungary's proposals for 180 billion euros ($227 billion) of loans to ex-communist economies in eastern Europe. The dollar and the yen strengthened as declines in Asian stocks added to concerns the global slump will worsen, stoking demand for safety.
"There's disappointment that nothing really concrete came out of the EU's weekend meeting and their failure to address eastern Europe's problems," said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. "The bias is for the euro to be sold" to $1.2560 and 122.10 yen today, he said.
The euro weakened for a second day versus the yen as EU leaders also told automakers such as General Motors Corp.'s European arm to look to national governments for help.
"I would advise against taking huge numbers into the debate," German Chancellor Angela Merkel told reporters at an EU summit in Brussels yesterday. "I see a very different situation -- you can compare neither Slovenia nor Slovakia with Hungary."
The worst economic crisis since World War II is devastating eastern Europe, putting at risk the EU's goals of forming a continent-wide free market.
The U.S. and Japanese currencies strengthened as Asian equities slumped. "Risk aversion is re-emerging, so the dollar and the yen are being bought," said Yuji Saito, head of the foreign- exchange group in Tokyo at Societe Generale SA, France's third- largest bank. "Investors appear to be repatriating funds."