Welcome to the Pure FX account of what’s affected the exchange rates over the weekend.
Spanish bailout looks more likely
How many blows to the stomach can the euro take? The common currency hit its lowest point against the Japanese yen since November 2000 over the weekend, as well as continuing to lose ground against the pound, as speculation Spain will soon require a full bailout reached fever pitch.
Last week, indebted Spanish regions including Valencia and Murcia went cap in hand to the Madrid central government, asking for cash to be kept afloat. Five other regions meanwhile could soon follow them down the same path, according to Spanish broadsheet El Pais. This has led to yet more rumours that Madrid will be unable to cope, and be forced to turn to the European Commission for rescue funds.
That (as I’ve noted in the past) could push the fabric of the Eurozone to breaking point. It’s hence what’s keeping the euro down.
Germany: No “horror” in Greek exit
Elsewhere, comments from the German government over the weekend didn’t help the euro either. German economy minister Philip Roesler said on Sunday that: “I think for many experts, for the FDP, for me, that an exit by Greece from the Eurozone lost its horror a long time ago.”
This caused speculation that Germany could soon withdraw its support from Greece, raising the nightmare scenario of its return to the drachma.
Of course, for many, once Greece goes, the idea that the euro is some sacred bond between European countries is broken, increasing the possibility that others could then follow Greece out of the currency. That makes the euro even less stable, accounting for its present weakness.
With no solution to the Spanish debt crisis in sight, its bond yields will continue to climb above the 7.0% danger point. Hour by hour, that raises the likelihood of its requesting a full bailout. Of course, if you plan to buy euros, this gives you a fine opportunity to get a great rate.
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