Saturday, January 16, 2010

Euro Falls to Three-Week Low Versus Yen on Greece’s Debt Crisis; Will the Drachma Return?

The euro dropped to a three-week low against the yen and fell versus the dollar as Greece struggled with its huge budget deficit and European Central Bank President Jean-Claude Trichet said the region’s outlook remains uncertain.

The 16-nation euro fell 2.1 percent to 130.61 yen this week, from 133.46 yen on Jan. 8. It touched 130.31 yesterday, the lowest level since Dec. 22. The euro depreciated 0.2 percent to $1.4387, from $1.4409.

Germany’s Chancellor Angela Merkel said at a private forum this week hosted by Die Welt newspaper that Greece’s fiscal crisis poses a “very difficult phase” for the euro..

The question remains will the EU inflate the money supply to help bail out Greece, or will they simply make Greece fend for itself? Some are speculating that Greece will eventually leave the Eurozone and bring back the drachma. If such does occur, to my knowledge, it would be the first time in the history of exchange that a currency is introduced for the express purpose of immediately inflating the currency to bailout government debt.

1 comment:

  1. If I'm not mistaken, the current party in power is a socialist party. This begs the following question: would the ECB be acting differently if the conservative party were in power?