Euro Tumbles Prior to EU Summit

By TraderVox.com

Tradervox (Dublin) – The 17-nation currency fell to almost two-week low versus the dollar on concerns the European Union leaders summit will not establish decisive measures to deal with the current debt crisis in the region. The euro remained down against the sterling pound as Spain and Italy prepare to sell bonds today despite fears that contagion will push borrowing costs higher. To add to the region’s woes, Moody’s has downgraded 28 financial institutions in Spain due to the increasing sovereign cost and real estate losses that have been experienced in the nation. There has been an increasing demand for the greenback as haven currency due to the continuing global losses of Asian Stocks.

According to Richard Grace, the Chief Currency Strategist and Head of International Economics at Commonwealth Bank of Australia, there is a high possibility of disappointing reports from the EU summit which has led him to predict a weakening euro as the weak comes to a close. He also suggested that the US dollar will remain one of the preferred safe haven currencies hence it might register another weekly gain this week. The Euro has so far depreciated from this year’s high of $1.3487 which was registered in February 24, dropping 3.4 percent against the greenback this year.

As Italy prepares to sell its two-year securities today, Spain will be trying to entice investors with its three and six-month bills. However, the 17-nation currency has continued to drop against most majors, dropping to $1.2471 the weakest since Jun 12. The euro dropped 0.4 percent against the pound to trade at 80.26 UK pence. However, the currency gained against the yen adding 0.2 percent to trade at 99.80 yen per euro. The Japanese currency dropped 0.1 percent against the dollar.

Investors are preparing for the US new home sales report which is expected to be positive for the dollar.

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