The euro dropped to a low of $1.1861 against the dollar during Asian trading hours on Monday. However, it did pick up slightly to trade at $1.1950 during European trading. This has seen the single currency lose as much as 1.2 percent of its value.
European shares were volatile, initially falling sharply before rebounding into positive territory within an hour of the open as investors digested the implications of the weak euro and yet another hefty slide in oil to a 5-1/2 year low, Reuters reports.
Euro lowest since March 2006 versus U.S. dollar on stimulus expectation by European Central Bank pic.twitter.com/tlO30BEKWE
- Rob Williams (@robwilliamsNY) January 5, 2015
The euro's slump has not been helped uncertainty concerning Greece. German Chancellor Merkel and Finance Minister Wolfgang Schaeuble have repeatedly warned the southern European nation about reneging on the bailout conditions that were set by Berlin. However, Merkel and Scheuble now believe the single currency would be able to survive if Greece decides to quit, according to a report in Der Spiegel.
"Many European officials believe a Greek exit would be manageable, and in contrast to 2010-2011, we wouldn't see the same cascading effect on countries like Spain or Ireland," Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, told Bloomberg.
Elections in less than three weeks' time in Greece have poured doubt on whether it is committed to the euro zone. The anti-austerity Syriza party have been campaigning against what they believe are draconian financial restrictions implemented against the 240 billion euro bailout received by Greece. In a speech on January 3, the party's leader, Alexis Tsipras described these constraints as being "unreasonable and catastrophic."
Syriza has a narrow lead in opinion polls ahead of the January 25 election, however Prime Minister Antonis Samaras warned if Tsipras's party is victorious, this will lead to a default and force Greece to leave the euro zone.
Comment: The failing Euro has little to do with anything Greece does or does not do. It has to do with the same type of blind and disastrous policies that caused Greece to collapse and kept her in economic ruin. It's really quite obvious by now that the EU is calling on its own destruction by following along with the US sanctions on Russia. But sure, Greece makes a nice scapegoat.