Euro falls to a 4-week low against the dollar

AP News
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Posted: Nov 09, 2011 3:46 PM
Euro falls to a 4-week low against the dollar

The euro fell to a four-week low against the dollar Wednesday on concerns that Italy could be the next country to be engulfed by Europe's debt crisis.

Italy's main borrowing rate jumped above 7 percent Wednesday, which indicates that investors are unsure of the country's ability to pay its debt. It also means Italy will be paying billions more in interest. Many economists think the higher borrowing costs are unsustainable.

Greece, Portugal and Ireland were forced to get financial lifelines after their rates rose above 7 percent. Unlike those countries, Italy's debt is considered too high to be bailed out by its European neighbors.

The euro fell to $1.3540 in late trading Wednesday, from $1.3835 Tuesday. Earlier the euro fell to $1.3521, its lowest point since Oct. 10.

The jump in borrowing costs comes a day after Italian Prime Minister Silvio Berlusconi promised that he would resign once a new budget is passed. Investors believe it will be easier for Italy to pass economic reforms without Berlusconi in office.

"Things can improve only once he resigns," said UBS currency strategist Chris Walker in a note to clients. "Not just states an intention to resign, but actually resigns."

Also adding pressure on the euro was uncertainty over who will be Greece's next leader after Prime Minister George Papandreou resigns. Greek politicians failed to name a new prime minister Wednesday. Talks will continue Thursday.

In other trading Wednesday, the British pound fell to $1.5917 from $1.6117. The dollar rose to 77.85 Japanese yen from 77.70, to 0.9097 Swiss franc from 0.8943 Swiss franc and to 1.0228 Canadian dollar from 1.0100 Canadian dollar.