Euro sinks to new low against US dollar

The euro sank to its lowest rate against the US dollar since September 2010 today. The euro bottomed at 1.2763 to the dollar on electronic trading platform EBS, with the decline expected to continue due to exacerbating euro zone debt problems.

The euro’s health is likely to hinge on next week's bond sales by the governments of Spain and Italy. The sales are seen as a test of euro using countries’ ability to generate income and funds.

Leading currency strategist Ankita Dudani said there had been a tendency to get rid of the euro in any rallies. The only breathing space the euro is expected to get in the coming week is if dealers use profits from short euro positions on short-covering.

The euro-sterling rate of £82.39 was also the lowest in 16 months, while in Japan on Thursday the euro-yen rate was 98.451, the lowest for 11 years. A Tokyo based currencies dealer said traders were disposing of their euros in large sums.

Chancellor Angela Merkel of Germany is scheduled to meet French counterpart Nicolas Sarkozy on Monday. The two will try and formulate policies to deal with the monetary crisis afflicting the euro zone. The focus of the talks is believed to be getting member countries to adhere to new budget regulations.

Investors are believed to be sceptical about whether the meeting will produce anything concrete as new agreements would take time to come into effect. Accords would probably not be timely enough to prevent credit ratings agencies from downgrading some EU nations.