Euro touches $1.3 mark

The rise and fall of the euro has the world economies on tenterhooks with countries worried about the effect of this fall on their domestic markets and currency. The week ending 18th December has been disastrous with the euro touching the lowest ever mark of below $1.30 for the first time since 12th January 2011.

The European Union set about trying to save the euro and prevent the member countries from seeking a bailout. Apart from the UK disagreeing with the new fiscal rules, the remaining 26 countries backed the new rules. European stock markets fell with most experiencing a fall of anything from 1.8% to 2.35% on 14th December.

European finance ministers are said to agree to a new €200 billion loan to the International Monetary Fund as per the deal to save the currency. The eurozone members are supposed to bring about two-third of the money, while Britain will be asked to chip in. As per figures available, the EU officials are most likely to expect Britain to become the second largest contributor. The British Prime Minister has time and again refused to provide any extra funds for the IMF for the purpose of saving the euro.

To make matters worse, the European Central Bank’s executive board member Juergen Stark said the bank should not be used to fund national debts and added that if it was forced to, it would mean the end of the single currency. The eurozone seems to be facing fresh crisis with these comments from the Bank’s executive board member.

With the euro hovering near 11-month lows, investors are naturally worried about credit downgrades for members of the 17-nation currency bloc. With six of the group already put on negative watch by Fitch Ratings and France’s triple-A rating down to ‘negative’ from ‘stable’ it is but obvious that investors are worried.

Analysts are worried that the current conditions coupled with aggressive moves by rating agencies might send the rising euro zone borrowing costs up. Any more downgrades by rating agencies are sure to batter the region already laden with problems of weak growth and sovereign debt.