Tuesday, June 16, 2009

Euro Goes on Slipping

The EUR has fallen below the $1.3800. It happened for the first time since last days of May. Risk aversion and selling pressure are still in favor. Buying the U.S. dollar is spurred. Late morning trading was marked by dollar selling cased by news that biannual stability review of European Central Bank admits euro zone financial sector is about to face a new wave of tests, worse credit terms and falling of asset prices.

The ECB mentioned in its biannual financial stability review that the largest banks of euro zone are predicted to suffer “further strains on profit” resulting in low profitability. It is also mentioned that euro zone banks may suffer further losses of about $283 billion in the period between now and the end of 2010. These losses will be related to some extent on loans. According to C.J.Gavsie, managing director of BMO Capital Markets in Toronto, that this news “throwing a little bit of lack of investor confidence into that European market”. He stated that the euro would reach support level around the $1.3685. EBS states that during late morning trading euro encountered its low at $1.3774 before rebounding. This fact should not be omitted while planning the trading strategies.

The euro moved essentially lower agains other currencies including the yen reaching daily low at Y134.93. Finally in morning trading the yen forced out the US dollar as the main performer in early trading. The Us dollar continues to shift in the same direction as gains by other currencies slowed. The investors started to to find out the dollar in earnest in overnight trading after the statements of finance ministers of the Group of Eight reinforcing the dollar`s status as the first global reserve currency. Alexei Kudrin, the Russian finance minister admitted dollar`s positive points as world`s reserve currency. New York Currency strategists at Brown Brothers Harriman informed that the euro was under pressure by mere signals of steps from G8 to certain form of bank stress testing in Europe.

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