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Euro plunges to two-month low under 1.30 dollars
AFP - Wednesday, December 1
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LONDON (AFP) - – The euro sank under 1.30 dollars and bond rates rose on Tuesday when the eurozone debt crisis raged on unabated by Ireland's bailout analysts said, but stock markets mostly rose.
In mid-morning London trading, the euro slid to 1.2999 dollars -- the lowest point since September 16. It later stood at 1.3000 dollars, which compared with 1.3121 dollars late in New York on Monday.
The dollar fell to 83.98 yen from 84.25 yen on Monday.
Gold, seen as a safe haven investment in troubled times, jumped twenty dollars to 1,376.30 dollars an ounce from 1,357 dollars on Monday.
"All this risk aversion and European crisis has benefited the US dollar," said Simon Denham, head of trading firm Capital Spreads.
Lee Hardman, an analyst at The Bank of Tokyo-Mitsubishi UFJ, said "there appears plenty of scope for further euro downside from current levels as the eurozone debt crisis intensifies".
Emphasising the markets' worry about contagion from the Irish debt bailout, Spanish and Italian government 10-year borrowing rates rose on Tuesday to a record wide gap above the rate eurozone benchmark Germany must pay.
Markets have given "a big thumbs down to the steps announced by the European authorities at the weekend" when Ireland's bailout was announced, said Hardman.
"The poor bond market reaction is an indication that the market is worryingly losing confidence in the European authorities' ability to deal effectively with the eurozone sovereign debt crisis.
"It is much harder to regain confidence than lose it," he added.
The gap between the Spanish and German borrowing rates widened to 3.0 percentage points on Tuesday, and the Italian gap to 2.09 percentage points.
The European Union and International Monetary Fund on Sunday agreed to an 85-billion-euro (113-billion-dollar) deal for Ireland but the announcement was quickly overshadowed by worries over which country could be next in line.
Ireland's rescue, which follows a massive bailout of Greece, have added to the pressures on other weaker eurozone members Portugal and Spain, with dealers talking of a contagion effect that could wreck the euro if it spreads unchecked.
Financial analysts warn that Spain is at high risk of eventually needing help to finance its debt and overloading EU safety nets, although the Spanish government strongly denies this.
At Pimco, a big fund heavily invested in government bonds, chief executive Mohamed El-Erian, said: "My concern is that indecisive management of problems in Greece and Ireland might lead investors to sell sovereign bonds issued by peripheral (eurozone) states as a preventive measure." Focus: Bonds, 'haircuts', savers and their shirts
Europe's main stock markets meanwhile all advanced on Tuesday, with London up 0.16 percent, Frankfurt gaining 0.61 percent, Paris nudging ahead by 0.02 percent and Madrid winning 0.31 percent approaching the half-way stage.
"European equity markets posted modest gains after US markets recovered much of yesterday's lows as financials and commodity stocks rallied late in the session," said Giles Watts, head of equities at City Index.
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