The euro weakened again on Wednesday in international currency markets after the head of the U.S. Federal Reserve, Ben Bernanke, warned that he is not prepared to indefinitely finance market stabilization.
The euro slid 0.4 percent against the dollar to $1.2315, and during the morning it touched $1.2263. It weakened 0.5 percent against the yen, to 111.13 yen. Bernanke stated that agreements among banks to strengthen dollar liquidity, renewed after the escalation of the Greek debt crisis, play an important role in stabilizing the market but warned that the Fed does not intend to indefinitely support such measures.
Although many in the market see this as a temporary measure, analysts point out that Bernanke’s statements maintain investor aversion to risk at a very high level and support negative sentiment towards the euro. The euro was further pressured by a weak response to the auction of German government bonds, which further emphasized the overall negative sentiment towards the eurozone.
"The market seems quite skeptical regarding the duration and scope of measures to strengthen dollar liquidity. The possibility of the euro falling against the dollar is stronger than the possibility of its rise," says Ulrich Leuchtmann, currency strategist at Commerzbank in Frankfurt. "We are in a phase of consolidation. Although new negative circumstances could trigger another wave of risk aversion at any moment, we hope the market will get a couple of days of respite for a breather," said Ned Rumpeltin, currency strategist at Nomura. (H)
