By: Barbara Zigah
Despite rebounding off a 4-year low, the single currency Euro continues to spiral downwards on investor fears that Euro-zone growth will be severely hampered by austerity measures put in place to help Greece, as well as other debt burdened European nations, put their fiscal house in order. As at 3:36 p.m. (JST) in Tokyo, versus the U.S. Dollar the Euro was trading at $1.2333, a loss of .5% on the trading day, but holding above $1.2234, the 4-year low struck yesterday on the EBS trading platform. The common currency also slipped against the Japanese Yen, trading at 114.04 Yen, and approaching the 8-year trough of 110.49 Yen, which was struck on the EBS platform earlier in the month.
Weighing heavily on the Euro’s value was the news that the U.S. Senate voted in opposition to the IMF bailout package for struggling Euro-zone nations. The United States is the primary contributor to the International Monetary Fund, and yesterday’s bipartisan and unanimous vote of 94-0 was a clear signal that the U.S. government wants reassurance that IMF loans would be repaid in full and is not simply a handout. It should be noted, however, that the bail out proposal needs only a majority vote of the IMF Board and a single holdout in the form of the U.S. government will likely not affect the outcome.