Euro declines as EU divisions deepen over debt crisis
The euro fell against most of its major counterparts as officials disagreed on how to quell the sovereign-debt crisis before next week’s summit of European Union leaders.
The single currency traded near the lowest in more than a week against the dollar and was down versus 12 of the 16 other most-traded currencies.
France yesterday backed Germany in refusing to add to the European Union’s €440bn rescue fund and rejecting joint euro-area bonds, deepening divisions before a December 16-17 EU summit.
French President Nicholas Sarkozy and German Chancellor Angela Merkel meet today.
The opposition is “going to probably scupper the e-bonds idea and would probably be taken quite negatively by the markets, so we could see the euro coming back under pressure,” said Ian Stannard, a senior currency strategist at BNP Paribas in London.
The euro slipped 0.1pc to $1.3228 at 9:33am in London. Yesterday it touched $1.3165, the lowest since December 2. It has dropped 1.3pc against the greenback this week. The euro was at 110.62 yen from 110.87 yesterday.
Spanish government bonds fell, increasing the additional yield investors demand to hold the securities instead of benchmark German bunds, amid concern government borrowing costs will rise at debt sales next week.