Continuing concerns over the Eurozone crisis and falling growth in Asia have caused investors to flock to the safe haven currencies of the US dollar and Japanese Yen.
Confidence amongst financiers is at a low before Thursday’s meeting of European leaders in Brussels on Thursday. Most observers don’t believe that the leaders of the Eurozone will decide on firm productive action to resolve the crisis which has dragged on for more than two years.
“The euro is a bit heavy against sterling and we may test 80 pence again soon,” said a spot trader in London. “Honestly we cannot see a resolution being pulled out of the hat from the EU summit meeting so that will keep risk appetite subdued and the dollar will be bid on any dips.”
The US dollar rose against a basket of its peers after demand for safe haven currencies rose. Poorer than expected economic data out of Asia and the ongoing Euro crisis has seen the Dollar hit a two week high. The dollar index rose to 82.585, up 0.35 percent on the day. The dollar was broadly higher against the euro and commodity currencies like the Australian dollar.
The ‘Greenback’ remained strong against the Euro as investors doubt that any firm decisions will be made at the upcoming European finance ministers meeting on Thursday.
“I would not rule out the euro falling further in the near term,” said Michael Derks, chief strategist at FxPro Group Ltd. in London. “I would not hold out a great deal of hope that this particular summit is really going to produce drastic measures or the big solution.”
The euro lost 0.6 percent to $1.2490, the lowest since June 13. It slid 1.1 percent to 100.03 yen. The Japanese currency rose 0.5 percent to 80.07 per dollar after depreciating to 81.45, the weakest since April 27.
The European commission’s vice president Olli Rehn said in a statement: “Restructuring the banking sector is key to reinforce the confidence in the Spanish economy and to restore the conditions to proper access to credit by companies and households, thus for sustaining the recovery.
The policy conditionality of the financial assistance, in the form of an EFSF/ESM loan, will be focused on specific reforms targeting the financial sector, including restructuring plans which must fully comply with EU state-aid rules. Conditionality will apply to banks being recapitalised and to the Spanish financial sector as a whole, including its supervision and regulatory requirements.”
The Pound to Euro exchange rate is currently trading at 1.246
The Pound to US Dollar exchange rate is currently trading at 1.555
The Euro to Australian Dollar exchange rate is currently trading at 1.250
The Euro to US Dollar exchange rate is currently trading at 1.248
The Euro to Pound exchange rate is currently trading at 0.802
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