The euro plummeted today to the lowest level in a year against the U.S. dollar and dropped against other most trading currencies on the concern that the bailout for Greece won’t resolve the nation’s budget problems and the crisis will spread to other European countries.
The speculation that the rescue package for Greece won’t be supported by all European governments saps the euro of its strength. The outlook for the European Central Bank to increase the interest rates by only 46 basis points, the slowest pace since September, caused the stocks to fall, resulting in the declining demand for the assets priced in the euro. The bailout meets significant resistance in Greece as the government plans to cut wages and increase taxes in order to receive the aid from the European Union.
So far most investors are not convinced that the Greece’s crisis will be actually resolved by the EU aid and that the troubles wouldn’t contaminate other countries, like Spain. Some economist say that only reason that won’t allow the euro to go further down is that the markets already are very short on the currency.
EUR/USD traded at 1.3030 today as of 17:00 GMT after it opened at 1.3194. EUR/GBP traded at about 0.8590 down from the opening level of 0.8652. EUR/JPY traded near 123.06
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