Euro hammered in Asia trade, hits 1-year low

By Anirban Nag

SYDNEY (BestGrowthStock) – The euro fell (Read more about the trembling euro. ) to its lowest in nearly a year on Friday, hammered by a wave of stop-loss selling in Asian trade as speculation Greece could default on its sovereign debt obligations spooked investors.

The euro fell (Read more about the trembling euro. ) to as low as $1.3202, from $1.3296 late in New York on Thursday when it lost 1 percent. Friday’s trough was its lowest since April 30, 2009.

Traders say a break below these levels suggests a broad downtrend has been established with a high risk the euro will test the key $1.31 support area in coming days.

Against the yen, the euro was down at 123.66, with traders wary the euro was on course to test recent three-week lows of 123.10 yen.

“The euro is getting clobbered as worries about Greece are intensifying and fears of a contagion are rising,” said David Scutt, a forex trader at Arab Bank Australia, Sydney.

“There were quite a few stops taken on its way down this morning and we have to see if $1.32 gives way later in the day when flows get better.”

The euro’s slide comes at a time when spreads between Greek and German bond yields hit the widest in 12 years and the cost of insuring Greek debt from default surged to record highs.

Sentiment toward Greece was considerably soured after European Union said Greece’s budget deficit was worse than feared and Moody’s cut its rating of Greek government debt.

Moody’s Investors Service downgraded Greece’s sovereign rating by a notch to A3 and placed the rating on review for a further possible downgrade, citing the risk that Greece may end up paying a lot more for its borrowing than initially thought.

Investors are betting Greece would need a bailout to avoid restructuring its debt or defaulting. Athens will have to refinance 8.5 billion euros of bonds maturing on May 19.

A Reuters poll of around 50 economists gave a median 80 percent chance that Greece would turn to its euro zone partners in the next two months and activate its aid package. Forecasters gave roughly a one-in-four chance that Greece would default on its debt in the next five years.

Against the yen, the dollar was steady at 93.53, after rising over 0.4 percent on Thursday after a rise in U.S. Treasury yields and a rebound on Wall Street.

U.S. data showing a fall in jobless claims and an increase in home sales reinforced the view that the U.S. economy is on a steady path to recovery and further supported the dollar.

The euro’s broad weakness was helping the dollar index (Read more about the global trade. ) (.DXY: ), a gauge of the greenback against six currencies, rise by 0.5 percent to 81.998, its highest since April 25.

Investment Research

(Editing by Wayne Cole)

Euro hammered in Asia trade, hits 1-year low