The EUR weakened to a 16-month low versus the dollar Friday on widespread downgrades of euro-zone countries by S&P’s Ratings Services. The ratings company downgraded nine of the 17 euro-zone countries, with the announcement coming after European financial markets were closed for the weekend and shortly after the U.S. stock market also had closed. While the actual downgrades were announced late in the day in New York, various officials in Europe including the finance minister of France had commented on the move before the ratings company made its official announcement.
The common currency was under pressure all day and will likely be further hurt as market participants worry about the recent developments in Europe, including a breakdown over talks on a debt swap in Greece. Late Friday, the euro was at $1.2678 from $1.28144 late Thursday. The common currency was at Y97.70 from Y98.37.
The EUR stayed above its low point of the day, of $1.2640, after the official confirmation by S&P late in the New York session. Whether or not the common currency can prove resilient when traders return to their desks Tuesday after a long holiday weekend in the U.S. remains an open question. Traders expect the EUR to fall to $1.20 as early as the end of the first quarter.
Investors had been on edge ever since S&P announced that it put 15 of the 17 euro-zone member countries on review for downgrade Dec. 5. Market participants have been especially concerned about France losing its top-notch, triple-A rating. S&P cut that rating to double-A-plus, one notch below the coveted top level. Austria’s rating was cut by a similar amount. Other triple-A rated countries–Germany, Finland, the Netherlands and Luxembourg–were spared of losing their top-notch ratings along with Belgium, Estonia and Ireland. Italy, Spain, Portugal and Cyprus had their ratings cut by two notches each. Malta, Slovakia and Slovenia were cut by one notch each.
The USD was at Y76.95 from Y76.75 and at CHF0.9520 from CHF0.9445.
EasyForexNews Research Team