Euro Falls on S&P Downgrades

By: Barbara Zigah

Following the downgrades of France and Austria on Friday, and the threat of several more before the week is out, the Euro is under fresh pressure, and touched on an 11-year low against the safe haven Japanese Yen. As reported at 10:24 a.m. (JST) in Tokyo, the Euro slipped 0.5% versus the Japanese Yen to 97.13 Japanese Yen, recovering from an 11-year trough of 97.04 Japanese Yen which had been struck earlier on the EBS trading platform. Against the U.S. Dollar, the Euro lost 0.3% to trade at $1.2641, and remains close to $1.2624, the 17-month low struck last week.

Now that the threatened downgrades have been realized, two key concerns have emerged. First, analysts and investors worry that with the downgrade of several of the Eurozone member states, the bloc’s bailout facility, the EFSF, might also lose its credit rating, currently at AAA. Then, it would seem that Greece has returned to the forefront of the debt crisis as the pressure is mounting on the Greek government to work with its private bondholders to take an even larger haircut even as they attempt to convince international lenders of their credit worthiness. In March, Athens has nearly €14.5 billion worth of bonds coming due and need the financial aid to prevent default.