Euro drops as Spain denies call for aid is imminent

An announcement by Prime Minister Mariano Rajoy of Spain that the country is not expecting to make an imminent call for aid from Europe has dented the euro slightly. However, things could have been worse for the single currency if the Australian dollar hadn’t fallen against most other currencies after an announcement by the Reserve Bank of Australia that its cash rate is to drop by 25 basis points.

The euro is down to $1.2917 after hitting a high of $1.2968 earlier. The single currency is however still a long way off Monday’s three-week low of $1.2804.

Despite Mr Rajoy’s comments the markets still appear to be waiting for a decisive move from the recession struck country after an announcement by the European Central Bank that it is prepared to initiate a bond buying programme.

Investors are also waiting to see whether Moody’s, the credit rating agency, will take Spain’s investment grade rating away. An announcement as to whether the country will be downgraded is expected later in the month.

Meanwhile the Aussie dollar is being offloaded after the RBA’s announcement. The Bank said it had decided to cut its cash rate to the lowest level it has been at for three years because of a decrease in export prices, a high local dollar and poor economic performance by China. The RBA has also not said whether or not further easing will be employed against a weakening domestic economic outlook.