By: Barbara Zigah

Following a huge sell off in the world’s equity markets, precipitated by the widening yield spread in Italian sovereign debt, the common currency Euro slipped near to 1-month low against the U.S. Dollar. As reported at 12:16 p.m. (JST) in Tokyo, the Euro was trading at $1.344, well off the Wednesday’s high of $1.3860 and likely to move closer to the $1.3145 low struck last month. A chief currency strategist in Switzerland said the markets were in panic mode, and the only respite for it is intervention by the ECB to buy Italian sovereign debt, something they have been consistently but reluctantly doing over the past few weeks.

Complicating events, the Italian Prime Minister said that he would prevent the Italian president from appointing an interim government, calling instead for early elections. However, that would mean a power vacuum of a period longer than markets can tolerate. In Greece, the Prime Minister said that he plans to step down although no successor has yet been named.

While market players expect the Euro to be under some significant pressure over the coming weeks, they marvel at the currency’s resilience, even as the Eurozone crisis escalates and are unclear as to where the repatriated funds are coming from with some speculation that Asian traders are participating in heavy Euro purchases.