Euro drops to four month low

The euro fell to a new four-month low versus the dollar today after news from Greece confirming that the country will stage fresh elections after political leaders were unable to agree on forming a coalition government, reports Reuters.

In an indication of a rapid increase in risk aversion, government bonds from Germany shot up and 10-year yields in Italy reached six per cent on the back of the news. Helped by safe haven demand, the greenback also gained on the yen as investors data releases from the US to those from elsewhere and saw that the world’s largest economy was on course for a recovery, although at a slow speed.

The news from Greece triggered the single currency’s fall below $1.2800. The country is running out of money in the run up to the elections and European leaders are likely to put great pressure on the Mediterranean country during the next few days to ensure a functional government is put in place as well as an extended bailout schedule.

The euro last stood at $1,2788, down by 0.3 per cent, with the trough for the session at $1.2769, the lowest it has been since 18 January. Adding to the negative news, the Greek economy is now deep in recession.