By: Barbara Zigah

Yesterday’s shocking announcement in Greece pushed the Euro to a 3-week low versus the U.S. Dollar, and most analysts believe that the single currency could slide further ahead of the Eurozone’s G-20 meeting. Early yesterday, the Greek Prime Minister surprised the markets when he announced that austerity measures would be put to a public vote, only days after the E.U.’s leadership worked to craft a deal which would wipe out half of Greece’s debt.

Traders are scurrying to cover their short positions following the Euro’s slide, and at 12:11 p.m. (JST) the Euro held steady against the greenback at $1.3695, well off the 7-week peak of $1.4248 struck on Thursday after the E.U. Greek debt deal was hammered out. The U.S. Dollar Index, which gauges the greenback’s strength versus a weighted basket of other currencies including the Euro, held close to a 3-week peak at 77.400 .DXY.

While Greek debt is a major concern, that doesn’t diminish the worries that financially strapped Italy is bringing to the table. Yesterday’s Italian bond market, in which the European Central Bank intervened heavily, set a new yield record of 6.3% between Italian and German debt instruments; in the span of only a few days, the gap between the sovereign debt instruments rose by 70 basis points.