Euro Hit Hard By Portugal Political Turmoil

Euro Hit Hard By Portugal Political Turmoil

Euro (EUR)

The single currency declined to five week lows against the U.S. dollar on Wednesday in the forex market amid rising tension in Portugal. Portuguese bonds slumped as resignation of two ministers fueled concerns that Eurozone debt crisis could get worse.

Euro was down 0.14% against the dollar to 1.2959, after briefly falling to a five-week low of 1.2923. Against the yen, it plunged more than 1% to 129.01. However, analysts believe traders would be cautious about selling the single currency aggressively before the ECB decision on Thursday.

Portuguese bond yields surged to 8%. Italian and Spanish bond yields also spiked. Greece is in a big trouble as ECB and IMF have given it just three days to prove that it can action its bailout conditions.

Dollar (USD)

The US dollar index rose to its one-month high versus a basket of major currencies. The greenback was helped by a string of positive economic data in the United States. ISM said that the country's PMI rose from 49 in May to 50.1 in June. Recently, some Fed officials have tried to ease concerns about the potential monetary stimulus pullback by saying that the central bank could boost its asset purchase program if required.

The dollar index surged to 83.635, its highest level since late May. The decline in the euro versus the yen pulled the dollar down 0.78% to 99.81 yen. But traders said that a positive employment report on Friday will boost the dollar up again.

Australian Dollar (AUD)

The Aussie skidded to about 3-year lows of 0.9052 versus the U.S. dollar after the Reserve Bank of Australia chief Glenn Stevens said the Australian currency is still resilient. Stevens said the central bank is ready to help the Australian economy shift to new sources of growth as its mining boom fades. Yesterday, the RBA decided to keep its cash rate unchanged at 2.75%.

The Aussie was last down 0.77% to 0.9076 versus the greenback. It also declined 0.3% against the yen to 91.69, and 0.4% against the euro to 1.4237. The Australian dollar has come under selling pressure due to a slowdown in Chinese economy, which is by far the biggest market for Australian commodities.

Yuan (CNY)

The Chinese currency was almost unchanged on Wednesday as the People's Bank of China's daily fixing indicated expectation for stability as Asian currencies and equities declined. Spot yuan rose 0.04% to 6.1306. Before the session started, PBOC set its midpoint at 6.1803 on Wednesday, 0.05% lower than Tuesday's midpoint.

Indian Rupee (INR)

Indian rupee extended losses on Wednesday amid crumbling stock markets, resurgent dollar and euro losses. Rupee declined to 60.38 against the U.S. dollar. Traders see an immediate resistance at 60.40.

The currency fell below 60 for the first time since June 27. The Indian rupee fell to an all-time low of 60.76 on June 26. Analysts expect the Reserve Bank of India to interfere now because worsening exchange rate will precede the inflation numbers.