Euro down to lowest in 11 years as Spain crumbles and investors flee
The Euro weakened to the lowest in more than 11 years against the Yen as investors sought safer assets amid mounting concern that European leaders are failing to control the region’s debt crisis.
The 17-nation currency slid to its lowest in more than two years against the dollar, falling below its lifetime average. It extended losses versus the dollar and Yen as Moody’s Investors Service cut to negative its outlooks on Germany, the Netherlands and Luxembourg. Six Spanish regions may seek aid from the central government, El Pais reported, spurring bets the nation’s finances will worsen and pushing Spain’s 10-year bond yield to a Euro-era high.
The euro fell 0.4 percent to $1.2113 at 5:37 p.m. in New York after losing as much as 0.7 percent to $1.2067, the weakest since June 2010 and below the average of $1.2087 since its inception in 1999. The shared currency fell to $1.1877 in June 2010, its lowest level since 2006. The euro dropped 0.5 percent to 94.93 yen and touched 94.24 yen, the lowest since November 2000. The yen rose 0.2 percent to 78.37 per dollar.
The Euro added to losses as Moody’s cited in a statement risks that Greece may leave the 17-nation currency and “increasing likelihood” of collective support for European countries such as Spain and Italy as reasons for the outlook changes.
“Given the greater ability to absorb the costs associated with this support, this burden will likely fall most heavily on more highly rated member states if the Euro area is to be preserved in its current form,” Moody’s said in the statement.
Yields on German 10-year bonds rose to 1.18%.
John Paulson, the billionaire hedge-fund manager, told clients he sees a 50% chance the Euro will break up, according to an investor who listened to the comments on a conference call. Paulson runs Paulson & Co. in New York.
Spain and Italy moved to ban short-selling of stocks amid market turmoil. Spain’s stock-market regulator, the CNMV, said its ban would cover all equities for three months. Italy’s regulator, Consob, said its week-long ban was introduced on some banking and insurance shares. A short position is a bet a security will decline.
Meanwhile Catalonia, Castilla-La-Mancha, Murcia, the Canary Islands and the Balearic Islands are among the Spanish regions that have admitted they may ask for aid from the central government after Valencia sought a bailout last week, El Pais newspaper reported.
The yield on Spain’s 10-year bond jumped to as much as 7.565%, the highest since the Euro was created.