EUROPEANS WILL BE getting less buck for their euro as the single currency has hit an almost nine-year low against the US dollar.
Fears of a Greek exit from the eurozone have been heightened as the far-left Syriza party takes a poll lead less than three weeks out from a Greek national election.
These concerns coupled with suggestions from ECB President Mario Draghi that inflation needs to be increased have led to the value of the single currency tumbling against the dollar.
After early market trading today, €1 will get you slightly below $1.19, the lowest level since March 2006.
The exchange rate has recovered slightly to $1.1950, a figure which represents a decline even on trading from Friday evening.
The chart below demonstrates how the Euro has been declining steadily against the dollar over the course of the past year, with the current level down on the 12 month euro high of €1 to $1.39 in May 2014.
A rocky Euro is nothing new and has routinely been a symptom of both New Year market volatility and political instability in periphery nations, often Greece. This latest slump is no different with Greek elections on the immediate horizon.
The head of the radical Syriza party said Saturday that if he won he would start “necessary change” in Europe and end painful austerity policies.
Over the weekend, the Der Spiegel weekly quoted German government sources as saying that Berlin sees a Greek exit from the eurozone as “almost inevitable” should Syriza party win the snap poll.
Both Merkel and her finance minister Wolfgang Schaeuble had come to consider that Greece’s departure from the single-currency bloc would be “manageable”, the magazine said.
French President Francois Hollande today urged Greece to abide by its European commitments.
“The Greeks are free to choose their own destiny. But, having said that, there are certain engagements that have been made and all those must be of course respected,” Hollande told French radio.
Super Mario
The euro’s losses meanwhile added to a sell-off on Friday that came in response to an interview with Draghi in German business daily Handelsblatt.
Draghi had said that deflation was a threat to the eurozone and the ECB needs to be prepared to counter it. He added that the risk that the central bank will not be able to push inflation up “has increased compared to six months ago”.
Additional reporting by © – AFP 2015
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