By: Barbara Zigah
Following a threat issued by Moody’s yesterday that French banks could be subjected to a possible credit downgrade, a repercussion of their Greek holdings, the common currency came under further pressure, slipping lower against the U.S. Dollar and Swiss Franc. As reported at 2:54 p.m. (JST) in Tokyo, the Euro lost 0.2% against the greenback, trading at $1.4414; earlier in the session, the EUR/USD pair traded at 1.4451 on the EBS trading platform on whetted risk appetite following Chinese inflation data and improved U.S. retail sales. Against the Swiss Franc, the Euro slipped back toward 1.20, the record low, before rebounding to 1.222.
Greece’s problems were further exacerbated when yesterday’s meeting of the Eurozone’s finance ministers failed to come up with an agreement on how Greece’s private debt holders should shoulder the costs of a new bailout plan. The common currency was also under pressure following a Financial Times article which said that a Greek debt rescheduling, as proposed by Germany, could require some Eurozone governments to pony up an additional €20 billion each. One currency analyst acknowledged that the issue of a restructuring isn’t the real problem, it’s the involvement of the private bondholders and the role they’ll likely be compelled to play.