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Tuesday 11th of May 2010
March 2, 2010    

Euro slumps to nine-month low against dollar

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by Kay Murchie
Euro slumps to nine-month low against dollar

Growing fears over the debt crisis in Greece continue to weaken the value of the euro and it sank further today to 1.3436 dollars - a level not seen since May 2009.

Greece is currently taking action to reduce its public deficit from 12% to 8% of GDP this year.

The country currently has the highest debt of the 16-member euro zone and its economy is considered to be the euro zone’s weakest.

According to one analyst, investors are still nervous about the prospects of a Greek bailout. Germany has already made it clear that Greece has to sort out its own problems.

In the meantime, the pound rebounded today after tumbling to a 10-month low yesterday over fears of a possible hung parliament in the forthcoming election.

A hung parliament (in which no one political party has an outright majority) would make it harder to pass legislation and undermine a fragile UK recovery.

Prime Minister Gordon Brown has to call a general election by June but there is speculation that the PM may call an election before this.

Yesterday, sterling dipped below $1.50 for the first time since May 2009. However, analysts warn that political uncertainty is likely to continue so sterling will remain vulnerable for some time to come.

Some believe it could slide to $1.20 or less by the summer.

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