By: Barbara Zigah
Investors’ worries about the Greek debt problem continue to put significant pressure on the common currency Euro, which today struck a new 1-year trough versus the U.S. Dollar. As reported at 11:41 a.m. (GMT) in London, the Euro slipped to $1.3143, the lowest trade since April of last y ear. Standard & Poor’s, one of the highest regarded international ratings agencies, yesterday downgraded both Portuguese and Greek debt. Analysts commented that the Portuguese downgrade of 2 points reflects broader credit risks within the Euro-zone, and which might precipitate additional concerns within the Euro-zone countries all of which will have a significant negative effect on the Euro. The downgrade of Greece’s sovereign debt to junk level status was enough to convince Angela Merkel, the German Chancellor, to hold off on the approval of a $59 billion Greek rescue package.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of major currencies (including the Euro) benefited from investor risk aversion, and was driven up to a new 11-month peak of 82.560 .DXY, the highest trade since May 2009. In the United States, a 2-day policy meeting of Federal Reserve officers will conclude today; investors expect no change in the current near zero interest rate, and reiteration of the Fed’s commitment to hold rates steady over an extended period of time.