By: Barbara Zigah
Euro-zone fiscal concerns are prompting market players to sell their holdings in the common currency Euro, which dropped to a 4-year trough in Asian trading today. As reported at 2:21 p.m. (JST) in Tokyo, against the U.S. Dollar the Euro was trading at $1.2284, a loss of .6% on the day; at one point in the session, the common currency had fallen to $1.2234 on the EBS trading platform, a price not seen since April 2006. This month alone, the Euro – now considered the poorest performing major currency – has lost in excess of 7% of its value against the greenback, and since the beginning of the year, nearly 14%. Risk aversion is driving the Euro’s fall, with many investors worrying about the Euro-zone’s economic recovery as a whole, given the requisite austerity measures that are a part of the bailout plan. New concerns center on European banks, and their own risk exposure vis-à-vis sovereign bonds and other debt instruments from those Euro-zone nations experiencing fiscal turmoil.
Late last week, comments made by two key European officials, Axel Weber and Angela Merkel, the ECB policymaker and German Chancellor, respectively, caused the Euro to plunge in trading. Axel Weber noted that achieving financial stability in the Euro-zone was fraught with lingering danger that should not be underestimated, while Chancellor Merkel noted that the joint IMF/EU rescue package merely bought additional time to bridge the gap between the weakest and strongest economies within the Euro-zone.