Euro Turns Sour on Greece News

Posted March 23, 2010

The euro falls as Greek debt aid falls short. US dollar gains while New Zealand struggles.


The largest news out of the currency market on Tuesday was that of Greek debt. The euro fell against the US dollar considerably after an announcement from German and French leaders stating that Greece needs help from the International Monetary Fund. Any Greek aid package will need to be supplemented by the IMF. That caused the currency to fall.

Investors believe that the European Union is not as strong as once believed, especially as the need to turn to the IMF is likely the first step. Selling off the euro is the safer option for investors. Other unsecure debt in the euro zone may cause further concern in the coming months.

The euro fell at a record rate against the Swiss franc. Investors seemed to believe that the Swiss franc was a safer currency to be in for the day. Switzerland's economy is growing and the overall opinion of the currency remains favorable and safe for investors. 

In addition, the New Zealand dollar dropped again on Tuesday trading. That marks the third time in four days that the drop occurred. The drop is due to the government's report that shows that the country's fourth quarter current account deficit was larger than what most economists believed it had been and forecasted.

By the numbers, the euro moved from $1.3499 to $1.3469 as of Tuesday morning trading. It hit a low of $1.3459. That marks the lowest level for the euro since March 2nd. The euro also fell to 121.80 yen, which is down from 122.03 yen in yesterday's trading. The US dollar moved slightly from 90.4 yen to 90.43 yen.
The euro fell against 14 of the 16 major counterpart currencies. Germany and France had agreed to back a bailout of sorts for the Greece debt a week ago, but a finance ministry office from Germany told reporters that the two countries would back the IMF role in providing monetary aid for Greece.

By all means, the data suggests that the euro will continue to weaken in the trading days ahead. It is expected that political pressure from German Chancellor Angela Merkel's party will cause her to resist any requests for aid to the Greeks at the European Union summit, which convenes on Wednesday. It is likely, then, that the Greeks will leave the summit empty handed in terms of monetary aid.

Further, the European Central Bank President Jean Claude Trichet said earlier this week that providing Greece with a low interest rate loan is not the route to take. That is what the Greek government is seeking. However, he did state that the European Union will not abandon Greece in their needs.

The Canadian dollar rose on Tuesday's trading. That marked the first time in four days that the country's dollar would gain. The Canadian dollar rose by 0.3 percent to C $1.0160 as of late Tuesday trading, which is from C$1.0189 on Monday's trading. Last week, the Canadian dollar reached its closest level to equality with the United States dollar since July of 2008.