RTTN: Euro Slumps On Lingering Worries Over Ireland
(RTTNews) - The euro that showed choppy trading against most major currencies in Asian deals on Wednesday plummeted during early European session as investors dumped the single currency on renewed concerns over Ireland's debt worries.
International rating agency Standard & Poor's downgraded the Irish Republic's sovereign credit rating on Tuesday, citing the country's bigger than expected borrowing requirements to finance its troubled banking system.
The credit rating was cut by two notches to A from AA- and the short-term rating was lowered by one notch to A-1 from A-1+. Both were placed on CreditWatch with negative implications, suggesting that more downgrades are likely.
The euro also dropped as the European Union urged Ireland to adopt an austerity budget on time to unlock the promised EU/IMF funding, in response to a deepening political crisis that could derail the financial rescue to recapitalise the country's banks and fund its public finances.
Ireland on Sunday asked for a massive loan from the European Union and the International Monetary Fund, as Greece did in May. Investors remain anxious that other countries in Europe may also have to seek aid.
Investors also sold the common currency amid geopolitical concerns following North Korea firing artillery shells on a South Korean island on Tuesday.
The euro declined to a fresh 2-month low of 1.3286 against the U.S. dollar in early European deals on Wednesday. If the euro weakens further, it may likely target the 1.320 level. At yesterday's close, the euro-dollar pair was quoted at 1.3366.
German Chancellor Angela Merkel said yesterday that the euro is facing extraordinarily serious situation amid the Irish debt crisis.
The crisis in Ireland is different from that in Greece, Merkel said. She noted that the Irish deficit was caused by banks. They are nonetheless worrisome, she added.
The euro has been in a downward channel against the dollar after it soared to more than a 9-month high of 1.4283 on November 05. Thus far, the euro-dollar pair has lost 7%.
During early European deals on Wednesday, the euro fell to a 2- 1/2 -month low of 110.33 against the yen. This was down 5% from a 5-month high of 115.70 hit on October 07. The next downside target level for the euro is seen at 108.0. The euro-yen pair closed yesterday's trading at 111.15.
The euro, which closed yesterday's trading at 1.3330 against the Swiss franc, slipped to a 12-day low of 1.3254 in early European deals on Wednesday. On the downside, 1.310 is seen as the next target level for the European currency.
