Euro falls as Spanish bank woes continue

The euro fell across the board today, hitting another record low versus the Australian dollar, with Germany warning that Spain’s financial woes are a long way from being over and that its government should ultimately be responsible for European help for its banks.

Prior to an aid for Spanish banks parliamentary vote in Germany, the German Finance Minister Wolfgang Schaeuble said that the mere perception of a Spanish insolvency risk could cause contagion across the euro zone. The single currency fell to session lows of $1.2229 following Schaeuble’s comments and last stood at $1.2242, 0.3 per cent down on the day.

Analysts anticipate that the currency will retest its two-year low of $1.2162 that it slumped to last week as investors, discouraged by little progress being made in solving the region’s debt crisis, continue to opt for safer havens rather than plump for the euro.

New York-based BK Asset Management’s managing director Boris Schlossberg said that things are moving back and forth on who’s liable for aid for Spain. He went on to say that the Germans are basically insistent that the liability remains with the sovereign and that simply exacerbates the sovereign’s debt burden, which the market doesn’t like.