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Euro Slides Further Against Dollar

Posted by on Friday, July 29, 2011, 10:07
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The euro fell further against the dollar in Asia on Friday as concern lingered over the eurozone debt crisis, but its downside was supported by the standoff in US debt ceiling negotiations.


The European common currency was down to $1.4305 in Tokyo morning trade from $1.4324 in New York late Thursday. The euro was almost flat at 111.24 yen against 111.28 yen.

The greenback was rangebound at 77.78 yen compared to 77.74 yen. As the euro stayed under pressure on recurring worries about eurozone debt problems, sovereign bond yields on Italy and Spain climbed overnight.

“In addition to the debt crisis in the eurozone, a possible US credit downgrading is also worrisome,” said Teppei Ino, analyst at the Bank of Tokyo-Mitsubishi UFJ.

“It would deliver an additional damper for European banks as they may be forced to reduce risky assets overall.”

The market remained focused on the course of US lawmakers’ negotiations for raising the country’s $14.29 trillion debt ceiling, as the clock ticked down to a August 2 deadline for averting a devastating default.

President Barack Obama’s Democrats and the opposition Republicans remained at loggerheads on Thursday over deficit-reduction plans in Congress tied to raising the debt limit.

The Republican-led House of Representatives planned to vote on a debt-reduction plan that the Democrat-led Senate was almost certain to reject. Market players were keeping an eye on the delayed vote.

“The dollar’s underlying weakness remains as nobody can be certain that an agreement will be reached by the deadline,” said Ino. “The market is jittery over whether the United States can avoid default.”

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