Forex News

EUR Fell as Eastern Europe May Not Get Help

EuroThe single European currency declined with a rather strong gap against the U.S. dollar and the Japanese yen today as the leaders of the developed Eurozone countries said that the Eastern European banks will not receive any financial aid.

The bank-devastating crisis is pressing hard on the European countries that haven’t adopted the euro yet, pushing down their currencies. The banks face significant risks as the national currencies fall against the dollar and the euro. Unfortunately for them, the European Union seems to be too slow in taking any unified measures to counter the crisis.

The euro dropped for the second day against the U.S. dollar and the Japanese yen, but rose against the British pound today. The traders favored the «safe» currencies as the stocks dropped worldwide and the appetites for risk declined even deeper. €180 billion ($227 billion) plan to help the Eastern European banks was vetoed by the European Union leaders today.

The analysts believe that only cooperative effort of the EU countries can stop the euro from falling after adding some confidence into the financial system of the regional economies. The local efforts of the separate countries can do little to save the banks from collapsing and the euro from the mass-sale for the dollar and the yen.

EUR/USD fell from 1.2618 to 1.2603 as of 10:18 GMT today after reaching as low as 1.2544 and opening with a significant weekly gap from the Friday’s close level at 1.2667. EUR/JPY declined from 123.18 to 122.50, while EUR/GBP rose from 0.8838 to 0.8870 today.

Euro Recovers From Yesterday Losses

EuroThe euro posted a moderate daily gain against the other major currencies today after some regional banks reported not-so-bad results for the fourth quarter of 2008.

Among the banks that surprised the market analysts were the German Commerzbank AG and the Dutch ING Groep NV. Both of them reported lesser losses for the last quarter than the average estimates showed. The euro also was positively affected by the yesterday’s better than expected reports on ZEW Economic Sentiment and Eurozone trade balance.

The Forex market analysts view the current recovery as a short-term correction gained solely by the conditions of the moment and see no strong reasons for the euro to appreciate significantly against the U.S. dollar or the Japanese yen. As to the British pound — it also has a lot of weak sides and can probably go down against the euro in a real trend unlike the other, less risky, currencies.

EUR/USD rose from 1.2578 to 1.2616 as of 8:47 GMT today after losing as much as 1.7 percent yesterday. EUR/JPY advanced from 116.17 to 116.52, while EUR/GBP grew from 0.8832 to 0.8899 today.