Arab Today, arab today euro hits sevenweek dollar low as stocks fall
Last Updated : GMT 13:56:54
Arab Today, arab today
Arab Today, arab today

Euro hits seven-week dollar low as stocks fall

Arab Today, arab today

Arab Today, arab today Euro hits seven-week dollar low as stocks fall

London - AFP

The euro dropped to a seven-week low point against the dollar on Friday and stock markets fell as investor confidence evaporated over a solution to the eurozone debt crisis, dealers said. The euro plunged to $1.3254, touching the lowest point since October 6, before a key Italian bond auction later in the day. It later stood at $1.3268, down from $1.3347 late in New York on Thursday. Italian bond yields meanwhile held above the 7.0-percent level which is deemed by analysts to be unsustainable. In morning deals, London\'s FTSE 100 index slid 0.60 percent to 5,097.22 points, Frankfurt\'s DAX 30 lost 0.65 percent to 5,392.78 points and in Paris the CAC 40 shed 0.42 percent to 2,811.01. Asian markets mostly fell on Friday, as Thursday\'s meeting between the eurozone\'s three biggest economies highlighted their differences on finding a solution to the region\'s debt problems. Germany and France promised to reform EU governing treaties on Thursday, but Chancellor Angela Merkel stood by her refusal to back eurobonds or widen the European Central Bank\'s role. France had urged Berlin to allow the ECB to become a lender of last resort, with the firepower to protect debt-ridden eurozone members from falling victim to the bond markets, but the German leader stood firm. After the crisis talks, French President Nicolas Sarkozy, Merkel and Italy\'s new Prime Minister Mario Monti said they would move to reform EU governing treaties but insisted there would be no wider ECB role. \"As confidence that a solution to this crisis might be forthcoming and that the euro will survive has evaporated, no surprise that international investors have chosen to ditch the euro in favour of more safe-haven currencies,\" said Howard Wheeldon, strategist at brokers BGC Capital. \"The reality is that as those charged with leading the eurozone out of this crisis appear to have moved further apart it seems to me that short of a miracle the euro will just keep heading south.\" Analysts at Moneycorp commented that a new proposed treaty looked like the one signed in Maastricht 19 years ago obliging governments to control their debt. \"Investors had heard it all before and they either yawned or sold euros,\" Moneycorp said. Sentiment was also slammed after Moody\'s ratings agency slashed Hungary\'s sovereign rating to junk status, one day after rival Fitch had cut Portugal\'s credit standing to junk. In addition, dealers speculated that China was scaling back its purchases of euros. \"Large euro purchases by the Chinese have been supporting the trouble currency this year, although this may have been scaled back somewhat due to the capital reserve increase by the China\'s Central Bank this week,\" said Spreadex trader Jordan Lambert. \"Many Chinese banks will be unwinding euro positions, amongst other assets, in order to meet the new capital requirements. \"This, coinciding with more sovereign downgrades, poor German debt demand and limited communication from EU ministers, is causing risk averse sentiment towards the euro,\" he added. EU economy commissioner Olli Rehn heads to Rome on Friday for talks with Mario Monti as the Italian treasury launches a 10-billion-euro bond sale to try to stem the nation\'s debt crisis. The bond auction has been pushed as a patriotic exercise, with some banks agreeing to waive their commission in a gesture of support for the beleaguered economy in the eurozone nation. Traders remained nervous at the end of a week that saw fears over Europe deepen as the yields on Italian and Spanish bonds sat dangerously high and even Germany -- the bloc\'s pillar -- failed to sell all its bonds at auction. But with the yield on Italian 10-year bonds, the broad cost of government borrowing, soaring back above 7.0 percent Thursday and holding above this level on Friday, Monti knows he needs to act fast to stop the rot. Whatever hopes Italy\'s new government might have for the bond sale will have been tempered by the experience of Germany, Europe\'s strongest economy. On Wednesday, Germany could not find buyers for more than two billion euros\' worth of 10-year bonds. German bonds are the gold standard of eurozone debt but Berlin managed to draw bids of only 3.9 billion euros for a six-billion-euro auction, indicating that investors are now sceptical about even the safest European assets. In Asian deals on Friday, Tokyo ended flat, while Sydney shed 1.48 percent and Seoul closed 1.04 percent lower. Hong Kong dropped 1.37 percent and Shanghai shed 0.72 percent in value. New York markets were closed on Thursday for Thanksgiving.

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