The euro sank under $1.30 and bond rates rose yesterday when the eurozone debt crisis raged on unabated by Ireland’s bailout analysts said, but stock markets were mixed.
The euro dropped to as low as $1.2969 during the day, its lowest point since September 15. In late trading it rose to $1.3030, still down from $1.3121 late in New York on Monday.
The dollar fell to ¥83.54 from ¥84.25 on Monday.
Gold, seen as a safe haven investment in troubled times, jumped to $1,383.50 an ounce from $1,357 on Monday.
“All this risk aversion and European crisis has benefited the US dollar,” said Simon Denham, head of trading firm Capital Spreads.
Lee Hardman, an analyst at The Bank of Tokyo-Mitsubishi UFJ, said “there appears plenty of scope for further euro downside from current levels as the eurozone debt crisis intensifies”.
Emphasising the markets’ worry about contagion from the Irish debt bailout, Spanish and Italian government 10-year borrowing rates rose yesterday to a record wide gap above the rate eurozone benchmark Germany must pay. Meanwhile, European stock exchanges slid for a second day in a row.
In London the FTSE 100 index down 0.41 per cent at 5,528.27 points, while in Paris the CAC 40 fell 0.73 per cent to 3,610.44 points and in Frankfurt the DAX dipped 0.14 per cent to 6,688.49 points.
Elsewhere Milan fell 1.08 per cent, Amsterdam 0.69 per cent, Lisbon 1.25 per cent, Madrid 0.62 per cent and the Swiss Market Index 1.33 per cent.
On Wall Street, the blue-chip Dow Jones Industrial Average slid 0.28 per cent to 11,021.69 points at midday, while the S&P 500 index, a broader measure of the market, dipped 0.49 per cent to 1,181.95.
The tech-rich Nasdaq fell 0.97 per cent to 2,500.76 points, with Google shares dipping 2.8 per cent following the opening bell on news that the European Commission will investigate if it abused its dominant position in the search and advertising market.
Markets have given “a big thumbs down to the steps announced by the European authorities at the weekend” when Ireland’s bailout was announced, said Mr Hardman.
“The poor bond market reaction is an indication that the market is worryingly losing confidence in the European authorities’ ability to deal effectively with the eurozone sovereign debt crisis.
“It is much harder to regain confidence than lose it,” he added.
The gap between the Spanish and German borrowing rates widened to three percentage points yesterday, and the Italian gap to 2.09 percentage points.
The European Union and International Monetary Fund on Sunday agreed to an €85-billion deal for Ireland but the announcement was quickly overshadowed by worries over which country could be next in line.
Ireland’s rescue, which follows a massive bailout of Greece, have added to the pressures on other weaker eurozone members Portugal and Spain, with dealers talking of a contagion effect that could wreck the euro if it spreads unchecked.
Financial analysts warn that Spain is at high risk of eventually needing help to finance its debt and overloading EU safety nets, although the Spanish government insists it does not need a bailout.
“Wall Street remains under pressure from fears of spreading contagion in the eurozone, with Spain and Portugal seen as the next potential targets in the wake of Ireland’s bailout,” said analyst Joseph Hargett of Schaeffer’s Research Investment.