LONDON (SHARECAST) - Worries about Greece’s huge debts and an S&P credit ratingdowngrade punished the euro Thursday, sending the single currency to a three-month low versus the dollar.
Investors sought the safety of the greenback, with a fresh view of the Federal Reserve’s timetable for a return to monetary tightening also prompting a ‘flight to quality’.
S&P cut Greece’s credit rating to BBB+ from A-, causing a fresh wave of selling on equity markets and a surge in the yield on 10-year government bonds.
The credit ratings agency blamed the move on a failure by the country’s leaders to tackle its huge debt problem. It’s also another blow to the country, still reeling from last week’s downgrade by Fitch.
Analysts also pointed to a raft of sell orders triggered by the euro’s slump through support levels at $1.45. That quickened the currency’s demise, leaving it more than 1% lower against the dollar.
The Fed’s plans to remove excess liquidity from the financial system, restated at this week’s policy meeting, also prompted a rush to the greenback.
Many traders who’d been shorting the dollar in recent months have now been forced to rethink their strategy, buying back the US currency to cancel those positions.
Sterling took a hit Thursday, down at a two-month low against the dollar following disappointing news on retail sales.
The volume of sales in UK shops fell 0.3% from the previous month against expectations of a 0.3% increase, figures from the Office of National Statistics (ONS) showed.
Lower department store sales and weak clothing demand were mostly to blame.
