Euro extended losses against the dollar and yen in the US trading session as worries about Greek and French commitment to austerity plans come into question after the weekend elections in the two countries resulted in votes for anti-austerity parties.
Greece’s two main pro-bailout parties failed to win a majority in weekend elections, leaving the country without leadership at the moment. A new coalition government has to be formed soon and questions arise over the country’s ability to avert bankruptcy and stay in the euro.
On Tuesday Greece’s Left Coalition party, Syriza, said Greece’s commitment to an EU/IMF rescue deal has become null and void. Comments by the party leader, Alexis Tsipras, who threatened to reject the EU/IMF bailout terms, immediately sent the EURUSD below the key psychological level of $1.30 and touched as low as 1.2982 in New York trading around 10:38 am Eastern Time.
EURJPY fell to 103.55, down 0.6 percent on the day.
Tsipras, who was given a mandate on Tuesday to form a government after his party came in second, said banks should come under state control and called for an international commission to investigate whether Greece’s debt is legal.
Concerns are also focused on France where the new president-elect Francois Hollande is also opposed to tough austerity measures and is said to disagree with Germany’s fiscal union plan.