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March 30, 2023

Euro tumbles to 4-year low on debt

Traders fear the austerity measures announced by Greece, Spain and Portugal would hurt growth.

LONDON – The euro slid to a four-year low on Monday on sovereign debt worries and fears that planned belt-tightening measures will hurt euro zone growth, fuelling concerns the single currency may face free-fall. The euro extended its losses after falling below the post-Lehman October 2008 low around USD 1.2330, where stop-losses from model accounts were said to lurk, and fell as far as USD 1.2234 on trading platform EBS, its lowest since April 2006, Reuters informs.

It has fallen more than 7 per cent against the dollar this month, and is about 14 percent lower for the year, making it the worst-performing major currency. “The euro is a one-way trade right now and capitulation is on my mind. I can see a move toward USD 1.2000 at least,” said Kenneth Broux, market economist at Lloyds Banking Group.Traders said volatile trade was impacting liquidity, making for exacerbated moves. Analysts said the widening euro zone problems had prompted a money market dollar liquidity shortage. “If the sharp deterioration in money markets persists into this week, look for central bank action to lower the cost of access to their dollar funding facilities,” Citibank analysts said in a note. A 750 billion euro rescue package from the European Union and the International Bond Fund aimed at shoring up euro zone bond markets has done little to underpin the euro. “Panic is now showing up in the euro currency because it can’t be really expressed in the bond markets after the EU/IMF package,” said Stuart Bennett, currency analyst at Credit Agricole CIB. “Fiscal and economic concerns are likely to weigh on the euro for the foreseeable future,” he said.

On Friday, the single currency euro plunged after European Central Bank policymaker Axel Weber said it was important not to underestimate lingering dangers to financial stability. German Chancellor Angela Merkel said on Sunday the rescue plan put together by the European Union and the International Monetary Fund had only bought time to sort out the yawning gap between the euro zone’s strongest and weakest economies. Traders fear the austerity measures announced by Greece, Spain and Portugal would hurt growth in the near term and force the European Central Bank to keep rates low in the medium term.

BNR reference rate rose to RON 4.1878/EUR, the highest since January 5, 2010

The national currency slightly depreciated in the first half of Monday’s inter-banking meeting, so that the reference rate announced by the National Bank of Romania rose by 0.64 ban, at RON 4.1878/ Eur, the highest since January 5, 2010, and reached a new peak of the past 14 months against the dollar, at RON 3.4018/ USD, Mediafax informs. The steady depreciation of the RON in reference to the dollar comes at a time when the American currency reached, on Monday, the highest rate in the past four years against the Euro, in Asian transactions, owing to fears from the investors that the problem of debts in several European states could affect the recovery of economy in the region.

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