ForexNewsNow – The euro continued its sharp decline against both the dollar and the yen on Monday as investors preferred to focus on the latter two safe haven currencies. The EU’s single currency is also still weighed down by the ongoing Greek sovereign debt crisis, with new rumors today that a structured default is already in the works.
The euro was decreasing in value against the US dollar today, trading at 1.3437 as of around 13:55 GMT.
The EUR/USD pair is down 0.448% on the day and has reached a session high of 1.3551 with a low of 1.3364 so far, its lowest level since January 18th.
The dollar, as well as the yen, continues to benefit from investor risk aversion as a result of EU debt crisis. “Investors are liquidating their risky assets, while the G20 meeting last week failed to clarify the situation in the euro area, and even contributed to an increase in concerns” of market participants in the absence of concrete decisions, noted Lee Hardman, an analyst at Bank of Tokyo-Mitsubishi.
In addition to the promise the Greek Finance Minister Evangelos Venizelos made Sunday in Washington, who declared that his country would continue to reduce its budget deficit whatever the political cost may be, euro zone member states committed to do “everything necessary” to “ensure the financial stability of the area as a whole” in a joint statement on Saturday.
The Europeans are also considering contributing additional funds to the European Financial Stability Facility (EFSF). The support fund, created in the spring of 2010 in order to help countries in trouble in the euro zone, has seen its scope continue to grow and its powers widened – although this still has to be approved by several states, and will be submitted to a closely watched vote by the German Parliament next Thursday.
It appears that as long as a political decision remains a hope and not a given, investors will not turn to assets considered risky, such as the euro. Even a Greek default, assuming that the shock would be absorbed by the market, won’t appease the concerns of contagion to other countries in the euro zone. A global solution is needed now – a local Greek solution will not be enough anymore.