Forex Market Update: Euro Hovers Around Four-Month Low Against Dollar

The euro hovered around its four-month low level against the U.S. dollar on Tuesday as investors still remain edgy over the euro zone debt crisis, fearing that harsh levy imposed by international lenders in lieu of euro 10 billion bailout package would serve as a precedent to other teetering financial systems of the euro zone.

The single currency of the monetary union slumped on Monday after the finance minister of the Netherlands and head of the Eurogroup; Jeroen Dijsselbloem, indicated that bailout deal of Cyprus would serve as a precedent for future recues. Although he later did a U-turn over his comments, saying that that the Cyprus bailout deal was a “specific case”,  investors’ sentiment derailed, hurting global equities and the euro.

On Tuesday, the euro edged up 0.1% to trade at $1.2868, not much recovery from its Monday’s low of $1.2829, which was its lowest level since November 22, a data provided by Reuters showed.

Meanwhile, currency traders expects euro’s 233-day moving average at $1.28497 as it next support in the short-term.

“The developments yesterday were quite negative for the euro as it looks to be a bit of a change in policy approach within Europe with respect to bailouts. They seem to be putting the emphasis onto investors rather than tax-payers,” said Ian Stannard, head of European FX strategy at Morgan Stanley, according to Reuters.

Earlier on Monday, the Cypriot parliament stuck an eleventh-hour deal with the troika (ECB, IMF and EU), preventing financial meltdown in the island nation. According to the deal, all unsecured deposits above euro 100,000 will be taxed heavily (deposits below euro 100,000 were exempted) and Cyprus’s second largest bank, the Popular Bank of Cyprus will be winded down while Bank of Cyprus will be recapitalized.

edliston

edliston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.