Comments by Chinese Banker Precipitate Euro Sell-off

By: Barbara Zigah

In Asian Forex trading today, the U.S. Dollar set a new 10-month peak versus the common currency Euro following comments from Zhu Min, a prominent Chinese central banker that added to investor worries over the Euro-zone’s heavily indebted nations. Zhu Min, of the People’s Bank of China, commented that the fiscal problems in Greece were only at the initial stages, this prompted short-term Forex traders to sell off their holdings in the common currency. On the EBS Forex trading platform, the Euro slipped at one point to $1.3283, the lowest price in nearly 10 months before recovering slightly and trading at $1.3303, still down .1% from yesterday’s late trade in the New York market.

Zhu Min’s remarks raised further investor worries about Euro-zone debt levels, especially given the recent downgrade of Portugal’s credit rating. Over the next two months, Greece will need to resettle nearly €20 billion, at a rate of borrowing twice as high as that of Germany.

The Euro’s decline is further compounded by the U.S. Dollar’s rise, which was helped along by investor belief that the Federal Reserve Bank will need to begin unwinding liquidity measures to a higher degree, which in turn will increase yields in U.S. treasuries. The U.S. Dollar Index, which gauges the U.S. currency’s value versus a basket of weighted currencies, at one point rose to 82.062 .DXY, a new 10-month peak, before easing back to 81.954 .DXY, all told a .1% increase in the day’s trading.