Posted April 23, 2010
For yet another day this week, the euro fell in value during trading. Greek debt, and the worry that the euro zone will be unable to pay for it, continues to plague investors.
Euro Fall and Climb
The euro fell during currency trading on Friday morning. In the Asian markets, the market did not take well to the worries about the euro zone nations. Investors worry that the countries will be unable to produce a plan that is effective at dealing with Greece's debt problems. The sell off of the euro resulted in a low level that has not been reached for the last year, against the US dollar. Investors still believe that the Greek debt problems could lead to the nation defaulting.
By the end of the day trading, the euro had come up some, but ended at US 1.3308, which is an increase of 0.1 percent on the day. This was due to Prime Minister George Papandreou requesting that the aid from the European Union and the International Monetary Fund be released for the country's use. He claimed that it was necessary for the country to seek to solve the problem quickly. The aid package is said to be worth between 40 and 45 billion euro.
Some investors believed that the euro may climb on the news of the aid package being utilized as a signal that perhaps the difficulties were coming to an end. However, most believe that any gain that the euro may have in late trading on Friday or on Monday would likely have a corrective rally. There is still some uncertainty on what the International Monetary Fund will require of the country for using the aid package. That could cost the euro as well. There is still the concern that other countries in the euro zone may have similar financial problems to that which Greece is suffering.
By the Numbers
By early morning trading, the euro fell to US $1.3201 which it has not seen since April 30, 2009. Many investors believe that the debt could fall below US $1.3000 during trading next week. The euro moved from Y 124.52 to Y123.64 in trading during the day. The fall of the euro against the US dollar moved the ICE Dollar Index up (an index that tracks the US dollar against a basket of trade weighted currencies which includes the euro.) It moved from 81.572 to 81.897.
During trading on Friday, the Australian dollar fell in value. The move was likely due to the central bank governor announcing that interest rates are close to being at average levels. This message seemed to tell investors in the currency that the government planned to hold off on its cycle of increasingly tighter monetary policy. The Reserve Bank of Australia's governor said that the bank believed the cash lending rate was close to being at a normal level after the government lowered it to compensate for the global financial emergency.