Posted April 23, 2010
In Thursday currency trading, the euro fell, again. This time, the euro zone currency fell to 11 month lows against the US dollar. Euro Zone Debt
Euro Zone Debt
The largest factors affecting the euro in Thursday's trading included Moody's rating cut of the European Union. Many investors see the euro as a no win investment. The Greek debt problems do not offer any quick solution. Even under most scenarios, the euro has too much risk for most investments, leading to the currency trading down significantly.
Even if investor's concerns for the risk were enough, also affecting the euro was a report out from Moody's Investors Services. The service cut Greece's sovereign ratings to A2, down from A3. The organization also placed the country on review for possible further downgrade in the credit rating charts. The warning comes as Moody's believes that there is significant risk that the debt that Greece owes may only be stabilized at a higher level and a more costly level than what was previously estimated by the organization.
Further difficulty came when Eurostat, the organization that provides European Union statistics, provided information that the Greek 2009 budget deficit is actually higher than what the country's government said it would be. That lead investors to believe that the Greek's may not be providing all information or may not be estimating accurately.
By The Numbers
During trading on Thursday, the euro fell to US $1.3258 after the Moody's downgrade. That is the lowest that the currency has been since May 2009. In late trading on Wednesday, the currency traded at US $1.3395.
The US dollar increased in value against the Japanese yen as well. It moved from 93.20 yen on Wednesday to 93.39 yen on Thursday.
The US dollar and the Japanese yen have favored well against the falling euro. Those investors looking for a way to more secure ground from the euro have turned to these two currencies. However, the yen has recently been under independent pressure from investors after ratings agency Fitch Ratings said that the Japanese credit rating is at risk.
Also noteworthy was information out from the Bank of Canada on Thursday. The country's national bank provided information that it would likely raise key lending interest rates from their current record low positions. Earlier this week, the bank had implied that interest rates would start to rise. On Thursday, the bank said that it was time to start removing some of the stimulus money that helped the country to pull out of a recession.
The bank said it was no longer promising to keep interest rates as low as they have been, which is currently 0.25 percent, even implying that the rate hike may come before the end of the quarter. Canada's bank said it believes the country will grow by 3.7 percent this year and that core inflation will remain close to the two percent target it is currently at. No information on when or how much the interest rate would increase was provided.