As Spain’s woes grow, the common currency Euro is set to post its largest drop against the U.S. Dollar in eight months. Bond yields on Spanish sovereign debt once again surged upward, striking a 6-month high and widening the differential between Spanish debt and German bunds. One currency analyst in Tokyo believes that markets are pricing in Spain as the next target.
As reported at 12:54 p.m. (JST) in Tokyo, the Euro-Dollar was trading at $1.2389, recovering from a low of $1.2358 a level which hadn’t been seen in almost two years. As the month of May closes out, the EUR/USD pair is poised to record a 6.6% drop. The Euro also fell against the safe haven Japanese Yen, with the EUR/JPY pair edging closer to 97.04 Yen, an 11-year low that was hit earlier in the year.
Markets are worried that Spain will be left with no choice but to seek help from the E.U./IMF/ECB troika, despite assertions by the Spanish government that they do not want outside help. Greek elections are also providing investors with another thing to worry about; a newly released poll shows that the divided factions, one for and the other against austerity, are now neck-and-neck; an earlier poll had shown that conservative sentiment, pro-austerity, was dominant.