Euro hits its lowest level against dollar since 2010
Shared currency plunges amid worries over deepening Spanish crisis and a possible Greek exit
THE euro touched its lowest level since July 2010 against the dollar as the bloc's sovereign-debt crisis deepened in Spain, Greece and even Scandinavia.
The currency fell as Catalan President Artur Mas repeated his call for Spanish central government to help regions access funding, and remained lower after Standard & Poor's cut the credit ratings of five Spanish banks.
Spain's deteriorating finances and a possible Greek exit from the euro weighed on investor sentiment more than an upbeat report on US consumer confidence.
Oil prices and European stocks rebounded after recent declines, but shares in Europe were lifted by defensive plays like utilities and drug makers.
Scandinavia's banks were also under the spotlight as the ratings agency Moody's cut its credit ratings on three of the biggest players in Norway and Sweden, citing the potential impact of the debt crisis on their access to funding.
Fund managers have caught fright at the increasing risk of contagion in the eurozone ahead of a possible Greek exit, and are rushing to dump euro assets.
This week's inconclusive Brussels summit did little to inspire confidence and Citigroup analysts even warned that the euro could fall to parity with the dollar.
"Europe is in a recession, China is slowing down, and the United States is slowing down as well," said Michel Juvet, chief investment officer at Swiss bank Bordier.
French banks, which are among the lenders most exposed to Greece, have stepped up their efforts on contingency plans for the debt-laden country leaving the eurozone, sources told Reuters.
The heightened preparations by banks, including Credit Agricole, BNP Paribas and Societe Generale, come after eurozone sources said that each member of the common currency would have to prepare a plan for a possible Greek exit.
The reports sent tremors through the markets. Most governments refused to comment on the reports of a meeting.
Newly inaugurated French President Francois Hollande said earlier this week that he viewed a Greek exit as out of the question and that no contingency plans were being drawn up.
"Over in the UK, the financial sector began this kind of contingency planning weeks, months ago," said Hubert de Vauplane, a partner at Kramer Levin in Paris.
"I find there is a higher degree of preparation in London than in Paris. For political reasons, the French banks have been more reticent."
French banking and insurance regulator ACP's head declined to comment yesterday on possible contingency planning. The regulators "would be completely failing in their fiduciary duties if they were not asking for it," the banker said.
BNP Paribas, SocGen and Credit Agricole declined to comment.