Greek and Spanish woes weigh on the euro

The euro (EUR) plummeted against the dollar sliding to a four-month low at 1.2655 from 1.2748 as risk aversion dominates the markets. World equities tumbled as investors fear that Greece may leave the euro after the second election in the country in June. Poor economic data from the US and concerns about the growing instability among Spanish banks further weighed on the single currency. Credit rating agency Moody’s downgraded 16 Spanish banks while shares in Bankia, the state-rescued lender plunged on news that clients have withdrawn 1 billion in the past week. Fitch downgraded Greece’s rating from BI to CCC, the lowest possible grade for a country not in default, citing the heightened risk that the country may leave the eurozone.  

The US dollar (USD) strengthened against a basket of currencies yesterday sentiment in the market was further hurt by weaker than expected economic figures from the US. Against the safe haven Japanese yen (JPY) the greenback dropped to a three-month low at 79.13 from 80.37 after the US Philadelphia Fed Manufacturing Index surprised the markets by showing a disappointing figure of -5.8 while 10 was expected. The negative reading signals an economic contraction adding further on the Federal Reserve’s concerns about the pace of the US economic recovery. Japan’s Finance Minister Jun Azumi said that the Bank of Japan is ready to intervene in order to stop the yen from rising further.

The British Pound (GBP) continues to decline against the dollar falling to 1.5732 from 1.5920 following the Bank of England inflation report released on Wednesday. The report left the possibility open for another round of quantitative easing while emphasizing on the increasing risk the UK economy faces by the eurozone deepening debt crisis.   

Oil fell to 91.60 dollars a barrel from 93.86. Gold (XAU) edged higher to 1579.78 dollars an ounce from 1542.55 and against the euro itedged higher to 1239.69 euro an ounce from 1210.86. Silver (XAG) advanced to 28.30 dollars an ounce from 27.40. Stay in tune throughout the day with!

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