Euro plunges to four-year low against dollar

Monday, May 17, 2010
By Paul Martin

Leo Lewis
TimesOnlineUK
May 17, 2010

From Times Online May 17, 2010

Euro plunges to four-year low against dollarLeo Lewis, Asia Business Correspondent 14 Comments
Recommend? (9) Nervous trading in Tokyo sent the euro into an early nosedive on Monday morning, as fears of further debt crisis contagion and stalling growth crept across dealing rooms.

The euro, already under pressure in New York before the weekend, plunged to a four-year low of $1.2306 against the greenback, sending stock markets in Japan and Korea sharply lower. Tokyo stocks were especially hammered, as the yen’s supposed safe-haven status pushed the Japanese currency higher, making life tougher for the country’s big exporters.

The euro’s slide propelled the battered currency through its October 2008 low of $1.2329 – a support level that many had thought would hold out for longer.

The currency turmoil gave yet another trading boost for gold: with the European currency suffering, euro denominated gold continued to gleam as an investment and Asian trading pushed its price to a record above €1,000.

Sterling slid to its lowest level since March 2009 at $1.4249 before rising back to $1.4343, down 1.4 per cent on the day. The pound fell on data from Rightmove suggesting that the past year’s rise in British house prices could be cooling.

Foreign exchange traders in Tokyo said that since the €1 trillion rescue package organised for the euro, there had been an assumption that the post-Lehman Brothers crisis low for the euro would, at least for a while, represent a line in the sand. With that now breached, attention is focused on the euro’s November 2005 low of $1.1640 against the dollar.

Sentiment appears to have been dented by the “strings” attached to both the bailout of Greece and the wider rescue deal for the euro. Austerity measures are being called for in a variety of eurozone nations that include France and Italy, and the concern for Asian economies is that growth rates will be savaged in one of their biggest export markets.

Naomi Fink, a Bank of Tokyo Mitsubishi currency strategist, said that the euro’s fall was better explained as a natural correction.

“I’m not joining the big panic on this,” she said. “The euro was overvalued for quite a time and now it is a bit more sensibly valued. This was bound to happen and overdue.”

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