Euro dips to 16-month low against dollar

Thursday, 05 January 2012 03:36

More fears over the state of the eurozone have seen the single currency drop to a 16-month low against the dollar.

The euro fell to $1.2831, which also represented an 11-year low against the yen.

Traders blamed the unsettling on the cost of France's borrowing going up and the suggestion that Spain may be presented with a higher bad loan bill than was previously thought.

France could also see its borrowing costs hiked further if it loses its top credit rating.

As a result, stocks in French banks fell by almost five per cent, while Spain's Santander witnessed its own decline by 3.3 per cent.

Chief strategist of FxPro Michael Derks told MarketWatch: "As widely expected, there has been absolutely no let-up this year in the mood of euro doom which characterised forex markets for much of 2011.

"Fears that Europe is already in recession and concerns that most European banks will struggle to raise capital are weighing on the single currency once more."

Meanwhile, the euro is also now at a 52-week low against sterling, with a pound now buying 1.20930 euros. This is despite sterling losing a small amount of ground on the dollar.

As a result of the economic uncertainty in the eurozone, analysts said the pound is seeing safe haven demand from investors for debt, something that is also occurring in Germany.

Last month, Italy saw its borrowing costs slashed following an auction of bonds, something that increased appetite for debt in the country.

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