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Euro Close to Two-Year Low

Euro Close to Two-Year Low

The euro is still close to its two-year low. Moody’s cut the rating for Italian government bonds due by two notches to a Baa2 rating. If Italy does not shore up their finances, Moody’s is prepared to drop the rating further. Currently, Italian bonds are only two notches above junk status. The new rating for Italy came at an unfortunate time for the nation. During trading on Friday, Italy will be starting a bond auction in order to raise 5.25 billion euros. With the new rating, investors may be frightened away from investments in the Italian bond market.

As Asian markets opened up, the euro was able to remain steady at $1.2206. This rate is uncomfortably close to the level of $1.2166 that the euro reached on Thursday. Thursday’s rate marked a two-year low for the euro and was partially caused by the low interest rates set by the European Central Bank. In early trading, the euro dropped as low as $1.2181 versus the dollar. Analysts believe that there will be support for the euro around the low it hit on June 29 of $1.2151.

Australian Dollar Rises

Investors in the Australian dollar experienced a sense of relief after the GDP for China was released. As Australia’s largest export market, the economy in China can severely impact how well the Australian economy performs. After the news from China came out, the Australian dollar gained 0.2 percent against the greenback to reach a level of $1.0166. Against the yen, the Australian dollar rose to Y80.60 on Friday from a level of Y80.92 on Thursday.

Some market analysts believe that the Reserve Bank of Australia will cut the interest rate in August. If this happens, it will be the fifth time the official interest rate was cut since November of 2011. The Reserve Bank of Australia may adopt this measure as a way to increase investor confidence in the Australian marketplace. Currently, the rate for the Royal Bank of Australia is at 3.5 percent. This is the lowest interest rate since in 2009.

Dollar Still Hold Steady

The United States dollar also did well on trading during late Thursday night.  It is up 0.1 percent against the yen and is trading at 79.33. The dollar index was at 83.614 early Friday morning which marks hits phenomenal high on Thursday. The rate for the dollar index on Thursday was at the highest level since July of 2010. 

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