Euro Falls Even Farther After Trichet Comments

Posted March 25, 2010

Euro hurts badly for another day. US, Canadian, Australian and New Zealand dollars do well across the board.


Thursday currency trading reflected heavily the statements made by European Central Bank President Jean Cluade Trichet. The euro fell to ten month lows on the day worth of trading. Trichet’s warning pushed the fear of Greek debt troubles even farther than they have been in recent trading.

Trichet sent a warning about the International Monetary Fund’s involvement in bailing out the Greeks on their debt problems. He made the comments after Germany and France backed a deal that the International Monetary Fund along with the European Union would provide the support that the Greeks need with their debt.

Trichet’s comments came after reports that a France/German agreement would involve a substantial amount of money from the IMF as well as bilateral loans from other European Union nations. The report also states that the bailout agreement for Greece would be a last resort and only available once the country took all other possible solutions to raise sufficient funds.

Once the news hit, the euro fell to the key psychological level of $1.33. On the flip side, the US dollar rose to new ten month highest against most of its immediate competitors.

One of the biggest factors affecting the Greek sovereign debt problems is the fact that misleading information continues to come out of the country. Initially, Germany and France provided assurances that the two countries would provide loans to Greece at low rates to ensure debt problems were able to be overcome. Then, news releases state that there is no deal in the works. This back and forth movement and the indecision over a solution on how to solve this debt continues to plague the currency markets.

The US dollar continues to look like the better option. Not only is the US dollar a safer option against the euro, but the US economy continues to improve and the rising Treasury yields continue to make the dollar look more promising. This plus the worry many investors have over the strength of the euro zone currency, investors are turning to the dollar for its stability.

By the Numbers

As of late Thursday currency trading, the euro stood at $1.382 which is down from $1.3325 as of late Wednesday evening. The euro stood at 123.13 yen from 122.80 yen.  The US dollar moved from 92.16 yen to 92.70 yen in Thursday trading. The UK pound also moved from $1.4883 to $1.4818.  The US dollar moved from 1.0732 Swiss francs to 1.0738.

Other Currencies

Aside from the Greek debt woes, other currencies did well in Thursday trading. The Canadian dollar, New Zealand dollar and the Australian dollar all responded well against the US dollar in Thursday trading. These commodity backed currencies rose on the day mainly due to currency investors looking for safer currencies to invest in. Each of these countries has seen a solid economic turnaround and investors are turning to them for shear fact that the economic fundamentals are behind the moves.

Also important, investors are pushing farther from Portugal and other euro zone currencies due to the downgrading in Portugal’s credit rating. Most expect this trend to continue throughout the euro zone.