In late Asian trading, the Euro is holding steady against the U.S. Dollar; investors are apparently taking advantage of the lull between last Friday’s stress test results and this week’s Eurozone policymakers meeting. The Euro is finally stabilizing, trading higher against the greenback currently at 1.4192. The Euro’s outlook, however, continues to be hazy as investors’ concerns that Italy, or worse, Spain, will be drawn in to the Greek debt crisis, are mounting.
Evidence of that concern can be seen in the recent bond auctions held by the Italian and Spanish governments yesterday. In both events, the yields for 10-year bonds rose perilously close to 7%, a rate beyond which analysts believe that funding costs will be largely unsustainable. At the point that Portuguese and Irish bond yields had risen beyond the 7% threshold, both Eurozone governments were compelled to request a bailout from the international community.
Another outcome from the continuance of the trend in higher yields according to an FX strategist in Tokyo is that investors will flock to the safe haven currencies, i.e. the Swiss Franc, the U.S. Dollar and the Japanese Yen, at the Euro’s expense. On Monday, the Euro struck a record low against the Swiss Franc, trading at 1.1365 on the EBS trading platform.
