Monday, October 06, 2008

Euro Falls to a 13 Month Low

The euro slid to a 13-month low against the dollar as a deepening credit crunch forced European governments to pledge bailouts of troubled banks and increase protection for depositors.

The 15-nation currency fell to the lowest in more than two years versus the yen as Germany joined with banks and insurers to bail-out property lender Hypo Real Estate Holding AG and Belgium announced a revised deal to rescue Fortis, the largest Belgian financial-services firm. The yen also gained against the Australian and New Zealand dollars as investors pared holdings of higher-yielding currencies funded with Japan's currency.

"Everything coming out has been fairly euro-negative," said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland. "The euro zone is the second domino of the globe to be falling over after the U.S."

The euro declined to $1.3648 at 9:45 a.m. in Tokyo from $1.3772 late in New York on Oct. 3. It earlier reached 1.3610, the lowest since Sept. 5, 2007. The euro fell to 141.97 yen, the weakest since May 18, 2006, and traded at 142.61 yen from 145.11 yen. The dollar bought 104.46 yen from 105.32 yen.

Against the pound, the euro fell to 77.15 pence, the lowest since March 14. It also declined to 1.5379 Swiss francs, the weakest in more than six months.

The German government and the country's banks and insurers agreed on a 50 billion euro ($68 billion) rescue for Hypo Real Estate after an earlier bailout faltered.

"It's unwise to buy a currency which is both in recession and having a banking crisis," Peter Pontikis, a treasury strategist at Suncorp-Metway Ltd. in Brisbane. "What's not going to help the bullish case in at least the short-term is that they have an as yet unresolved banking cloud over the U.S. system."

The dollar will weaken to $1.45 per euro over the next month, he said.

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