Posted December 01, 2010
Euro continues fall. Euro ends month down 6.9 percent.
The Tuesday trading session continued to be a negative one for the euro. The euro fell 6.9 percent for the month in November. This marks the worst month for the euro in falling in value since May, when the Greek debt crisis was heating up. The fall of the euro during the Tuesday session allowed for the lowest level against the US dollar since the middle of September to be achieved. This was due to the euro zone debt fears, which continue to grow.
Government bond yields for Spain and other countries soared. The euro moved from US $1.3121 in late day trading on Monday to US $1.2986 by the end of the day's session on Tuesday. That moved it below the US $1.30 psychological level for investors. It is the lowest it has traded since September when it traded as low as US $1.2967.
For the year, the euro is down 9.3 percent. If it continues to fall, it could become the second worst annual loss for the euro since the start of records.
The US Dollar improved mainly because investors see it as a safer option over the euro. As such, the US dollar index moved from 80.797 in late trading in North America on Monday to 81.311 by the end of trading on Tuesday. The index shows an improvement of 5.2 percent for the US dollar in the month of November and a 4.4 percent rise for the year overall.
Investors demanded a full three percentage points in yield premiums to hold Spanish 10 year government bonds over German bonds. This is the highest level it has been at since the 1999 launch of the euro. Bond yields also rose in Italian, Portuguese and Spanish markets. This came before Standards & Poor, a credit rating agency, put Portugal on its long term sovereign rating for review, to a potential downgrade.
While much of the focus is on the euro zone, it is important to note that the US economic data being offered seems more positive than in the past. The US economy added 155,000 jobs in the month of November, according to the reports likely out this Friday. The US index also showed that US home prices fell in the month of September. This further slows the annual rate of appreciation.
Against the yen, the US dollar moved from Y 84.25 on Monday to Y 83.65.