The euro extended losses against the dollar on Monday despite a big election win for Spain’s centre-right party on Sunday. Spanish and Italian bond yields rose again as well as French yields as Moody’s gave a warning on the outlook for France’s credit rating. The ratings agency said a rise in the borrowing rate on French bonds and possibly slowing growth could have a negative effect on France’s top AAA credit rating. EURUSD fell 0.66 percent in the European session to touch a low of 1.3428. Euro bounced 1.3476 after EU Commissioner Manuel Barroso said Greece will be receiving the 6th aid tranche soon.
Sterling fell to a one-month low against the dollar after UK housing data showed U.K. prices fell by the most in a year amid increasing concern that the economic growth outlook is deteriorating. Prime Minister David Cameron said Britain is well behind where it needs to be on economic growth and the euro-area crisis was having an effect on growth. The FTSE 100 index of shares dropped for a sixth day, falling 2.1 percent. GBPUSD plummeted almost 1 percent to touch a four-week low of 1.5611.
The Canadian dollar weakened against the US dollar as market sentiment was also dampened today by reports that the latest efforts to cut the US debt faced failure as a government committee reached a stalemate on negotiations. Investors stayed away from taking risks, and turned to the safehavens like the US dollar.The greenback is highly liquid and is used as a global reserve currency which is the reason it is a perceived safe haven, eventhough the issue is the US debt. Risk aversion weighed on commodity prices which in turn weighed on commodity-linked currencies like the Canadian dollar. Crude oil, Canada’s major export, fell by $2 so far today. USDCAD climbed 3.6 percent on the day to hit a six-week high of 1.0367.
The yen appreciated versus the euro and the dollar as risk aversion increased demand for the safe haven Japanese currency. US deficit talks are creating risk aversion and USDJPY fell to a day low of 76.75. The euro depreciated 0.6 percent versus the yen, to touch a low of 103.21 as euro zone debt woes pressured the euro.