Jitters over Europe drive the euro below $1.30

AP News
Posted: Dec 14, 2011 3:38 PM
Jitters over Europe drive the euro below $1.30

The euro fell below $1.30 Wednesday on fears that European leaders won't be able to solve the region's debt crisis. It's the first time the euro has fallen below that level since January.

"Confidence is certainly seeping," said Kathleen Brooks, research direct at FOREX.com in London. "The EU summit was so off the mark of what needs to be done that sentiment has drained."

At last week's European Union summit, the 17 nations that use the euro agreed to tighten spending. But traders are recognizing that more is needed to be done to protect larger economies like Italy and Spain from defaulting on their debt.

The euro fell to $1.2977 in late trading Wednesday from $1.3043 late Tuesday. It fell to $1.2943 earlier, its lowest point since Jan. 7.

Italian borrowing costs rose again on Wednesday, a sign that investors are worried that the country could default on its debt. It's also further evidence that last week's summit did little to deal with underlying debt problems.

Europe's debt crisis is spreading from smaller countries, such as Greece and Portugal, and is starting to affect larger economies such as Italy and Spain.

Traders are losing confidence that politicians will be able to come up with a solution for the region's debt crisis.

Brooks said that most people believe that the only way to end Europe's debt crisis is if the European Central Bank buys up more sovereign bonds from Italy and Spain. She said that scenario "doesn't seem likely," since many politicians have spoken out against it.

In other trading Wednesday, the U.S. currency was higher against most other currencies. The British pound fell to $1.5466 late Wednesday from $1.5487 late Tuesday.

The dollar rose to 78.07 Japanese yen from 77.97 Japanese yen, to 0.9533 Swiss franc from 0.9448 Swiss franc and to 1.0402 Canadian dollar 1.0322 Canadian dollar.

The dollar was also higher against currencies in Australia, New Zealand, Norway, Hong Kong and Latin America.