The Euro hit a session low against the US Dollar and record lows against the Australian Dollar and Canadian Dollar.
The slumps come as investors grow increasingly concerned over the state of Spain’s finances, the autonomous region of Valencia has come forward saying that it will need central government aid in order to repay its debts. The region is thought to be just one of many autonomous regions that may require a handout.
The news increases the chance that Spain, the fourth largest economy in the Eurozone will need a full-scale bailout in the near future at a cost of hundreds of billions of Euros. The country’s situation has not been helped after its 10 year bond yields rose above the dreaded 7% mark in today’s trading session.
The Euro fell 0.7% against the US Dollar to hover just above a two year low. The Euro had been impacted earlier in the day by a German newspaper report quoting a key German finance minister saying that Eurozone country’s need to comply with reforms or leave the Euro.
“Valencia was clearly the catalyst for today’s falls. I’m slightly surprised the market has reacted as violently as it has, but I think that’s a reflection of broader negative sentiment and stops being taken out once the move got going,” said Adam Cole, global head of FX strategy at RBC Capital Markets.
The single currency hit record lows against the commodity based currencies of the Aussie and Canadian Dollar despite worries that Chinese growth is slowing down. Traders are saying that this is a deeply worrying sign for the Euro as despite concerns for other regions of the world the Euro continues to flag, confidence is reaching lows of terminal proportions.
The other winner from Spain’s turmoil today is sterling. The Pound climbed to a three-and-a-half year high of €1.2863 against the Euro on the back of the dismal news.
The Pound to Euro exchange rate is currently trading at 1.285
The Pound to US Dollar exchange rate is currently trading at 1.564
The Pound to Australian Dollar exchange rate is currently trading at 1.507
The Euro to US Dollar exchange rate is currently trading at 1.217
The Euro to Pound exchange rate is currently trading at 0.777
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