The Euro finally rebounded on Wednesday after consistent selling pressure for last three days. No doubt reasons behind the depreciation of the single currency are the debt crises faced by most European countries. Further the addition of new European countries in list of one with sovereign debt problems brought the Euro near to its lowest against the greenback since September 15th, 2010.
The latest happening regarding the situation of debt crises was the high yield premium over government bonds in countries like Portugal, Italy and Spain which resulted in the heavy selling for the single currency. However in last few days the regulatory authorities of the respective countries did reduced the yield premium but still the Euro remained under pressure.
Currency strategist Lutz Karpowitz from Commerzbank in Frankfurt commented, “Spreads I Portugal, Italy and Spain are a bit narrower, and that’s leading to the correction in the euro, if the (auction results) disappoint, they would immediately put the debt crisis back into focus, and be used to sell the euro versus the dollar.”
Now traders are expecting that Portugal would be the next to go for a bail out option from International Monetary Fund and European Union. Standard & Poor is also reconsidering its rating for Portugal and A- is being reviewed for the country.
In last month the Euro reached its high of 1.4281 against the US dollar and fell to the low of 1.3446 versus the greenback in reaction to the news of Ireland’s bailout. Strategist at RBS Greg Gibbs from Sydney commented, “You really need some aggressive action from the authorities in Europe to try and calm nerves and that’s really the key at this stage.”
