Euro Trading Volatile

Once again the beleaguered euro hit a 10 month low against the US dollar paring earlier gains in currency markets.  Trading remain volatile in advance of today’s EU summit in Brussels, Greece’s ongoing debt crisis and Wednesday’s downgrade of Portugal’s rating by Fitch’s rating agency dragged the euro down in trading sessions. In Asian trading the euro hit an all time low vs. the Swiss franc as disagreements among EU nations on how to solve Greece’s massive debt problems prompted Asian hedge funds to dump the euro. Currency experts believe the euro will continue its decline throughout the week due to disagreement among EU leaders which is making investors nervous. The euro pared earlier losses after a spokesman for the Athens government said that a French-German plan to aid Greece “sends a message of stability.”

IMF Aid Would Be Negative For Euro

Earlier the euro fell after European Central Bank President Jean-Claude Trichet said that the EU needs to take responsibility for other EU states and that International Monetary Fund aid to Greece is “very, very bad.” Camilla Sutton of Bank of Nova Scotia stated, “Trichet said that turning to the IMF would be very difficult. The implication is that an IMF aid package would be negative for the currency. His comments highlight the ongoing uncertainty in the EU, and it’s the uncertainty that’s impacting the market.”

Contingency Plan Developed by France and Germany

The contingency plan developed by France and Germany “satisfies” the Athens government said Greek spokesman George Petalotis. He also said the plan “covers us fully” and EU leaders are expected to discuss the plan tonight. Investors and currency experts remain cautious. Omer Esiner, of Travelex Global Business Payments said, “The market sees a high level of uncertainty until we get details on a plan to bail out Greece, and we’re seeing the euro fall as a result of that. The involvement of the IMF is somewhat of a negative for the euro.” European Union executive and Spanish Prime Minister Jose Luis Rodriguez Zapatero told reporters in Brussels that “We need confidence in the European currency.” European Commission President Jose Manuel Barroso echoed Zapatero’s statement.  Barroso also said that he supports the ECB decision to loosen finding and collateral rules. Barroso told reporters, “As you know, according to the (EU) treaties the ECB is fully independent so it was a decision taken by the ECB but it has my full support and the full support of the Commission.” Until the EU agrees on a solution for Greece’s debt woes the euro is likely to remain under intense pressure.