Fri, 13 Aug 2010 00:00:00 +0200

Euro's Decline Continuing as Risk Aversion Takes Hold

The euro has been in steady decline this week versus most of its currency counterparts. The sudden trading shift away from the 16-nation single European currency has many analysts debating the potential causes behind this movement. The euro has fallen against the US dollar from 1.3333 towards 1.2860 since Tuesday. Against the British pound, we have seen a decline from 0.8355 to as low as 0.8200. Also, versus the Japanese yen the euro zone currency has gone from just below 114.00 to as low as 109.00, and currently trades at 110.40 after Japan's yen took a dive from statements made by the Japanese finance minister. The question on the minds of many analysts now is whether this transition away from the euro represents a return of weakness to the euro zone - a type of resurgence of the Greek crisis from earlier this year - or just a rise in risk aversion as traders seek to put their assets into safer investments. Statements from the American Federal Reserve about monetary policy shifts has made many traders feel uneasy about future growth prospects and could explain the move back into safer investments. With the euro zone primarily absent today's economic news, the euro shouldn't be much affected by today's events except indirectly. The US market appears to be the front-runner in today's market with a number of indicators carrying a traditionally heavy impact. Traders would be well advised to follow the opening of the US market since it will be releasing its retail sales and core retail sales figures at that time.

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