Euro falls after S&P downgrades France of AAA credit rating

January 15, 2012 by · Leave a Comment
Filed under: Credit News 

This may be the signal for another round of downgrades in the Euro zone.  With Germany, the Euro-star also seeing a reduction in GDP, could this be the signs of a recession?  It has been quite quiet in the Euro-zone over the last 6 weeks with many analysts wondering what would trigger more downward pressure.   Too much complacency in my opinion, yes it is a election year in the United States but we have not gotten our house in order and many parts of the world have just been masking the problems, not addressing them in any meaningful fashion.

Look to see how markets open in the U.S. on this news, if we see a sharp sellout, it could be a sign for more things to come.

The euro fell in early Asia-Pacific trading after Standard & Poor’s stripped France of its top credit rating and cut eight other euro-zone nations, magnifying concern the region’s financial turmoil will intensify.  The shared currency depreciated in each of the past six weeks against the dollar, dropping to a 16-month low. European leaders are divided and falling behind in their response to the sovereign-debt crisis, Frankfurt-based Moritz Kraemer, S&P’s managing director of European sovereign ratings, said on a Jan. 14 conference call.

“Investors should be short the currency now and we’re concerned that Friday’s mass downgrades of euro-zone countries by S&P is not fully priced yet despite the euro falling to new 16-month lows,” Mansoor Mohi-uddin, chief foreign-exchange strategist at UBS AG in Singapore, wrote in a Jan. 14 report.

The euro fell 0.3 percent to $1.2648 as of 6:15 a.m. in Sydney from $1.2680 at the close of trading last week, when it touched $1.2624, the least since Aug. 25, 2010. The shared currency depreciated 0.2 percent to 97.34 yen after reaching 97.20 yen, which matched its lowest level since December 2000. The dollar was unchanged at 76.97 yen.

Futures traders increased bets to a record that the euro will weaken against the dollar. The difference between wagers that the shared currency would fall versus those that it would rise — so-called net shorts — surged to 155,195 in the week ended Jan. 10, according to data from the Commodity Futures Trading Commission released Jan. 13.

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