Euro down as Spanish troubles overshadow Greek elections

The euro dropped from a one-month high versus the dollar on Monday after the election win for Greece’s pro-bailout parties was offset by Spanish bond yields climbing back above the seven per cent mark which traders see as unsustainable.

While the Greek election result allayed immediate worries of the country being forced to quit the eurozone, uncertainty remained as the victorious centre-right New Democracy party attempted to create a government with other international bailout-supporting parties.

Many investors were of the opinion that the new government would be unable to carry out further austerity measures as the economy is now in its fifth consecutive year of recession. Market players also remain concerned about what the eurozone will do to protect Italy and Spain from the debt crisis.

Rabobank FX strategist Jane Foley said that the currency has already fallen from the day’s highs, showing that while the Greek election was positive, everybody is aware it will be a long road to recovery and that Greece’s problems are nowhere near at an end. She added that even if there are big improvements with Greece, Spain still has mounting problems.

The euro dropped by 0.15 per cent to $1.2619 on reported offloading by Asian investors and breaking below stop-loss orders of around $1.2660-70. Earlier it reached a high of $1.2748 during Asian trade.