EURO on a four month low due to Greek crisis

The euro was stuck at four-month lows against the dollar in Asian trade Wednesday amid fears over political uncertainty in debt-ridden Greece and its wider impact across the 17-nation euro zone. The euro bought $1.2715 in Tokyo
afternoon trade, compared with $1.2728 in New York late Tuesday, and treading its lowest levels since mid-January. The common currency fetched 102.16 yen against 102.12 yen, while the dollar was changing hands at 80.40 yen, slightly up from 80.23 yen late
Wednesday in New York.

“There is a pervading sense of unease in financial markets, a disquieting feeling of having been in something like this position before and wondering if it might turn out the same,” National Australia Bank said in a note. “In Greece,
there are increasing outflows from its own banking sector and broader discussion of contagion effects,” it said.

Greece must hold fresh elections next month after talks on forming a new government broke up without agreement Tuesday, prolonging a tortuous crisis which could ultimately see Athens exit the euro zone and even the European Union.

“The concern now is regarding contagion. It’s not Greece per se that is the problem, but the credibility of the euro as a currency,” the bank said. Spain was already feeling pressure with yields on its 10-year bonds rising, it
added, while 26 Italian banks saw their ratings downgraded.

Masafumi Yamamoto, chief strategist at Barclays Bank in Tokyo, said the dollar may rise above 81 yen if minutes of the US Federal Reserve policy-making body due later Wednesday suggest the Fed will hold off additional easing steps.
“It’s worth paying attention to whether the number of the Fed board members supporting additional easing will decrease,” he told Dow Jones Newswires.

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Posted by Hamza Jahangir on May 16 2012. Filed under Latest News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry