ECB will help limit losses, bank president reassures
San Francisco, CA -- (SBWIRE) -- 10/11/2012 -- Financial concerns about Greece and Spain pushed the euro down on Tuesday.
The European currency on Friday reached a two-week high at $1.3072 but on Tuesday fell to $1.2932. The euro also weakened against the Japanese currency, falling 0.3% to 101.24 yen.
The European Central Bank repeated that it would back countries in the euro region limit losses, the bank’s president, Mario Draghi, said.
Fund managers are still cautious about the euro and skeptical about advances the currency has made since July.
“Going forward, we think the euro zone economy is clearly one of the weakest in the world, and we think the ECB will have to cut rates further,” Jaco Rouw, a fund manager at ING Investment Management, told Reuters. He said fund managers have fears “to the downside.”
“Although important steps have been made both by the ECB and European politicians to save the euro, we think we will get new periods of stress,” Rouw said.
The economies of the euro region still have far to go to recovery, the ECB’s Draghi told the European Parliament Committee. The bank president said Greece has more to do although it has progressed with its economic reforms.
International Monetary Fund officials and finance ministers from the euro region have not been able to decide what to do with Greece, despite a recent “robust” debate.
Lenders are considering whether to give Greece an additional two years to achieve budget reduction goals; yet, discussions are still at a starting point, said Greek Finance Minister Yannis Stournaras. Investors are becoming concerned, a currency expert said.
“While uncertainty about Spain plays out, investors are also getting worried about the Greek situation,” Adam Myers, a senior currency strategist for Credit Agricole, told Reuters.
The euro strengthened to its best level in three weeks against the Swiss franc, while Swiss and Danish currencies will face a penalty from a U.S. custodial bank, media reports have said.
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