Finance

Finance

Euro falls to 16-month low vs. dollar

06 January 2012 01:21 (UTC +04:00)

Baku-APA. Worries about Europe’s banking sector have pushed the euro to its lowest rate against the US dollar in 16 months, APA reports quoting Press TV.

Euro has tumbled to its lowest rate against the dollar in the past 16 months as confidence in the European Union (EU)’s financial institutions continues to deteriorate and concerns over the eurozone debt crisis grow.

The European single currency dropped to $1.2831 on Thursday, which was the lowest exchange rate against the dollar since September 14, 2010, as major eurozone financial stocks fell.

Shares of the Italian bank UniCredit slumped for a second day in a row after it had to offer huge discounts on its stock prices on Wednesday to attract investors.

â€œConcerns that the eurozone sovereign debt crisis could worsen may lead to the reintroduction of national currencies in one or more eurozone countries or, in particularly dire circumstances, the abandonment of the euro,â€ the bank stated in an unusual warning.

Meanwhile, Spain’s new Economy Minister Luis de Guindos said on Thursday that Spanish banks might face up to 50 billion euros ($65 billion) in bad loan provisions.

Euro’s value has also been affected by attempts on the part of eurozone governments to issue new bonds to raise money.

The French treasury agency declared Thursday it had raised 7.963 billion euros ($10.22 billion) in bonds maturing in 2021, 2023, 2035 and 2041.

There are serious worries that the eurozone debt crisis -- which has already resulted in bailouts for Greece, Ireland and Portugal -- could also hit the far-larger economies of Italy and Spain.

The worsening debt crisis has forced EU governments to adopt harsh austerity measures and tough economic reforms, triggering incidents of social unrest and massive protests in many European countries.