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October 26, 2012 @ 12:29 pm

Euro extends losses over Euro zone crisis concerns

Currency markets were dominated by a risk off sentiment amid ongoing concerns over the euro zone debt crisis, which led to light flows ahead of the weekend.


Disappointing headlines out of Europe was the catalyst to the decline in the euro. Spain reported third quarter unemployment rate rose to the highest in over three decades, as the jobless rate breaches 25 percent, bringing number of Spaniards without a job to 5.8 million. Spain is the fourth largest euro zone country and a prolonged debt crisis there will likely affect the rest of the euro zone.


Meanwhile, Greece, another heavily indebted euro zone economy is causing concerns after reports that it may miss its austerity targets. A report from the International Monetary Fund said Greek debt would be above the target agreed with international lenders, while the Greek government said a deal on Athens’ latest austerity package was being held up by opposition from a coalition ally. Greece has until Sunday to reach an agreement. Missing this deadline could further drag the euro lower.


The euro fell 0.3 percent to $1.2893 in the European session. Against the yen, euro dropped 1 percent to 102.725 yen , bringing it to a 10-day low.The outlook for the single currency is also dim due to uncertainty about when Spain will request a bailout.


The safe haven yen benefitted from risk aversion and is up by over half a percent and is outperforming the dollar. News that the Japanese government approved a new fiscal  stimulus package to support growth in the economy has helped lift yen. The package amounts to 750 billion yen.


Focus turns to the North American session. The US will release third quarter GDP, expected to climb 1.9% q/q annualized.


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