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Euro sinks further on Greek sovereign debt woes

By Haris Afzal on Monday, May 23, 2011 with 1 comment

Euro sinks further on Greek sovereign debt woes

TOKYO: The euro fell against other major currencies in Asia on Monday, weighed down by rekindled worries about eurozone sovereign debt after Greece's credit rating was slashed, dealers said.

The euro fell to $1.4083 in Tokyo morning trading from 1.4155 in New York late Friday. The single European currency fetched 115.50 yen, down from 115.66.

The dollar rose to 81.99 yen from 81.70 yen.

The euro "may face continued selling pressure today, following last week's trend, against the backdrop of sovereign risks," Junichi Ishikawa, FX analyst at IG Markets Securities in Japan, told Dow Jones Newswires.

The euro dropped to an all-time low of 1.2348 Swiss francs in early trade before pulling back to 1.2367, against 1.2417 late Friday.

The European currency dived after Fitch Ratings on Friday slashed Greece's credit rating by three notches to B+, citing its growing problems in getting its public finances in order.

There has been much speculation that Greece might have to restructure or reschedule its debt, a move that some fear could plunge the eurozone back into the kind of turmoil it suffered during the financial crisis of 2008.

Fitch said the move reflected the "scale of the challenge facing Greece in implementing a radical fiscal and structural reform programme necessary to secure solvency of the state and the foundations for sustained economic recovery."

However, it expects substantial new money will be provided to Greece by the EU and IMF, and therefore "Greek sovereign bonds will not be subject to a 'soft restructuring' or 're-profiling' that would trigger a 'credit event' and default rating," it said.

Standard & Poor's downgrade on Friday of its outlook for Italy from "stable" to "negative" dealt another blow to the beleaguered euro.

The downgrade came amid concerns that the fragility of the government's centre-right coalition would hamper attempts to slash the country's vast debt.

Safety experts warned ash from an erupting Icelandic volcano that closed the country's airspace may blow across large swathes of western Europe, raising fears of new flight chaos.

But experts said the impact should not be as far-reaching as 2010, when a similar event caused widespread flight cancellations.

Category: Business News , Geo News

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