Tuesday, 27 Apr 2010

Euro Plummets Following Ratings Downgrades

The euro tumbled versus the dollar and the yen following a downgrade of Greek sovereign debt to junk status and a lowering of Portugal's debt rating. The drop in ratings by S&P comes as market participants fear Greek fiscal woes are beginning to spread to other European nations, such as Portugal and Spain.

Towards the close of New York trading session, the EUR/USD was trading at 1.3180 after opening the day at 1.3380. The EUR/JPY was down at 122.85 from its opening day price of 125.58.

The sharp deprecation in the value of the euro came immediately after the credit downgrade. The rating of junk status speaks for itself and will be a negative for the Euro-zone and the euro. A lack of certainty in a bailout for Greece has provided traders with a strong incentive to sell the euro.

Further declines could be in store for the euro as the downward momentum is strong. The depreciation of the EUR/USD slowed at the support line of 1.3180, but further selling could be in store. The next major support level for the pair rests near the 1.3050 level.