The euro fell to its lowest level in two months against the US dollar as mounting concerns over euro zone debt dampened market sentiment. Many are unconvinced that the new fiscal measures agreed upon at the EU Summit last week will help solve the crisis. The new deal requires substantial belt tightening which consequently will hamper growth in the region and push the weaker economies into further debt, causing a viscous cycle.
Moody’s said today that the EU Summit failed yet again to take concrete steps to tackle the debt crisis and will put the euro zone countries under review for a downgrade.
At the Italian bond auction today, yields on one-year bills rose to 5.95 percent, much higher than the average of 2.70 percent before the crisis.
EURUSD fell below the key $1.32 level and touched a low of 1.3162 in the North American trading session, the lowest since October 4. Against the pound, euro fell to its lowest level in ten months, reaching 84.50 pence. EURJPY slid 1.2 percent on the day to 102.61.
The dollar strengthened against a majority of its major counterparts as investors sought safer assets in a risk averse environment. The U.S. dollar index which tracks the performance of the greenback against a basket of other major currencies, rose to 79.533 from 78.622 in late North American trading on Friday.
The dollar advanced to as high as 77.99 yen.
The Canadian dollar fell to its lowest level against its U.S. counterpart this month as the euro zone crisis sapped risk. Commodities fell, putting commodity-linked currencies like the loonie under pressure. Crude oil decreased as much as 2 percent to US$ 97.54 a barrel. USDCAD rose to a day high of 1.0284 compared to Friday’s close of 1.0167.