Euro's Down And Greece's Economy Is Even Worse Off Than Thought ...

Snip ... For European exporters, such as big multinationals in France and Germany, a weaker euro could be positive by making their goods more competitive in global markets. That could help soften the impact of falling demand within the euro zone. Currently, "the euro at this level is unbearable" for European exporters, said Mr. Wynne.

1. The euro zone "needs a weaker currency for its survival."

2. Barclays believes the recent decline sets the stage for a sharply lower euro in 2012. It expects the euro to hit $1.25by June and $1.20 by the end of next year.

3. The euro's decline "is a move ahead of potential more aggressive ECB easing," said Jose Wynne, head of North American foreign exchange strategy at Barclays Capital

4. The IMF warned Tuesday that the recession in Greece is turning out to be deeper than expected and released a wider-than-forecast budget shortfall for the struggling country.

5. Last week's agreement among 26 governments will be complicated by the decision of U.K. Prime Minister David Cameron to veto an EU-wide plan

December 14, 2011

Selloff Comes After Period of Resilience for the Currency

The euro tumbled to its lowest level against the dollar in nearly a year Tuesday amid mounting concerns about Europe's economy and doubts about the latest government efforts to contain the continent's debt crisis.

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In the past two days the currency has dropped 2.6% to $1.3037, a level not seen since January. The euro is down 12% from its 2011 high in May.

Tuesday's drop came as investors became more wary about the commitment from European governments to agreements reached at Friday's summit.

Senior European officials warned of the difficulties of implementing any accord that calls for tougher budget discipline. Some leaders also questioned whether last week's agreement to channel €200 billion to the International Monetary Fund was allowed under European Union rules.

Also Tuesday, markets were shaken briefly by new data showing Greece's economy is even worse off than thought.

This week's selloff comes after a period of surprising resilience by the euro. Despite gloomy headlines, the currency remained well above $1.30 most of the year. But the backdrop has grown increasingly negative for Europe's common currency.

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