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Business

Euro drops to1.26 dollars, hitting near 14-month low

Text by News Wires

Latest update : 2010-05-06

The euro struck a near 14-month low on Thursday, falling to 1.26 dollars despite European Central Bank assurances that Greece would not default on payments.

AFP - The euro tumbled under 1.27 dollars on Thursday, striking a near 14-month low, despite assurances from the European Central Bank that crisis-hit Greece would not default.

At about 1320 GMT, the European single currency dropped as low as 1.2691 dollars, the lowest point since March 11, 2009.

"Default is for me out of the question," European Central Bank president Jean-Claude Trichet insisted in Lisbon on Thursday after a monetary policy meeting at which eurozone borrowing costs were held at 1.0 percent.

Greece and Portugal are not in the same fiscal situation, Trichet added amid fears that the debt crisis could spread to Portugal.

However, the shared currency was hammered by fears that Greece might default on payments and spread contagion across the eurozone, dealers said.

"The euro is under heavy selling pressure as the situation in Greece reaches crisis point," said Mark Bolsom, head of the trading desk at foreign exchange specialist Travelex.

"The markets are worried that Greece will default on their loan repayments and have no confidence in the bail-out package the IMF are trying to push through," he said.

"There is also mounting concern that the crisis could spread to other member states and the added threats of contagion is exacerbating investors' concerns.

"The markets just don't have any confidence in the eurozone's financial system."

Date created : 2010-05-06

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