Friday, 10 Dec 2010

Sovereign Debt Fears Sinks the EUR

The euro witnessed a steady depreciation against most of its major currency counterparts on Friday, staying soft on concerns over the sovereign debt crisis in the euro-zone while talk of the possibility of more monetary tightening in China dampened appetite for risk. . The EUR is currently trading lower against the USD by nearly 30 pips at 1.3235. It is also trading lower against the GBP.

Strong Chinese export and import figures helped commodity-linked currencies like the Australian dollar a little, but gains were limited as the better data also increased the risk of an interest rate hike.

As the market comes to a close, the EUR may continue to weaken further, as forex traders feel that the EUR is a risky bet for today. As a result, sentiment towards the euro remained shaky, after Fitch ratings agency slashed Ireland's rating by three notches to BBB+ on Thursday, pointing to the fiscal costs of restructuring.