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Forex - EUR/USD extends losses as Moody’s put Spain on review

Published 12/15/2010, 06:02 AM
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Investing.com – The euro extended losses against the U.S. dollar on Wednesday, as the cost of insuring Spanish government debt against default rose after ratings agency Moody's warned that it may downgrade Spain’s credit rating further.

EUR/USD hit 1.3286 during European morning trade, the pair's lowest since Monday; the pair subsequently consolidated at 1.3294, shedding 0.62%.

The pair was likely to find short-term support at 1.3181, Monday’s low and resistance at 1.3437, the high of December 3.

The premium that investors demand to hold Spanish government debt rose, with the yield on ten-year bonds rising by nine basis points to 5.59%. The gap in yields between Spanish debt and benchmark German government bonds also widened.

Earlier in the day, Moody’s put Spain's Aa1 sovereign credit rating on review for a possible downgrade, citing high funding needs, doubts over its banking sector and concerns surrounding regional finances.

Elsewhere, German Chancellor Angela Merkel said Wednesday that European Union leaders will adopt a deal to create a permanent mechanism for resolving sovereign debt crises when they meet later in the week.

The euro was slightly lower against the pound, with EUR/GBP slipping 0.03% to hit 0.8476.

Later in the day, the U.S. was to publish a flurry of data, with reports on consumer price inflation as well as data on manufacturing activity in New York State. The country was also to publish official data on industrial production.


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