Euro losing ground against other currencies: ECB

The euro has fallen against most major currencies in recent months as volatility on the foreign exchange markets has increased in the debt crisis, the European Central Bank said Thursday.
"Between the end of April and early August 2012, the effective exchange rate of the euro depreciated overall amid a renewed increase in volatility," the ECB wrote in its regular monthly bulletin.
"On August 1, the nominal effective exchange rate of the euro, as measured against the currencies of 20 of the euro area's most important trading partners, stood 4.4 percent below its level at the end of April 2012 and 8.2 percent below its average level in 2011," the ECB said.
Between April 30 and August 1, the euro lost 6.9 percent against the US dollar, 9.1 percent against the Japanese yen and 3.1 percent against the pound sterling, it said.
Over the same period, the euro fell 2.2 percent against the Hungarian forint and 1.6 percent against the Polish zloty. By contrast, it rose 4.2 percent against the Romanian leu and by 2.0 percent versus the Czech koruna, the report said.
"Market volatility increased throughout May from the relatively low levels reached at the end of April but declined during June and has stabilised around historical averages since July," the ECB said.
The central bank also noted that the so-called spread or gap between rates on bonds of stronger eurozone countries and those in difficulty had widened further between June and August as investors avoided risk and sought safe-havens for their money.
"Between the end of June and August 1, yields on AAA-rated long-term euro area government bonds decreased by approximately 40 basis points, to around 1.8 percent," it said.
The cut in the ECB's key interest rates in early July contributed to the fall in yields -- the rate of return earned by holders of the bonds, the report said.
Conversely, the yields for countries in receipt of financial aid programmes, such as Spain and Italy, have increased.
"In the period under review the yield spreads on ten-year sovereign bonds vis-a-vis German sovereign bonds increased for Spain, Italy and most of the countries under financial assistance programmes, while spreads declined by between 20 basis points and 40 basis points for Belgium, France, the Netherlands, Austria and Finland," it said.

 

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