Panic Spreads as Euro Hits a 4-year Low on Debt

Panic Spreads as Euro Hits a 4-year Low on DebtPanic has gripped the European Economy as the euro plummeted to a fresh four-year low as against the U. S. dollar.

The fall of the Euro is attributed to the widespread worry over the outlook for the euro-zone banking sector and the uncertainties by the major ratings agencies for the sovereign downgrades.

According to FactSet, the euro traded as low as $1.2110, down from $1.2301.

The readings from the Chinese purchasing managers are also weak, as a report from the European Central Bank cautions that euro-zone banks might be in the need to write down an additional _195 billion in debt within the span of the next 18 months. The same would widen the bond-yield spreads within the euro zone that has followed the downgrade of Fitch's Friday of Spain.

All the factors combined add to the tone of the situation.

Further, the resignation of German President Hoerst Koehler and the more pressure on the tensions over Gaza also impelled the investors to nudge away from the euro and other currencies which were prone to high risk.

According to the analysts, all these factors totaled up at strengthening the US dollar.

Fearing a downward trend in the country, French Budget Minister Francois Baroin, "The objective is challenging and it will in part condition the savings strategies that we want to have".