Euro cuts losses on fears of Greek default

A downgrade for Italy to an A rating by Standard & Poor has sparked a further assault on the euro this morning (September20th) as fears arose that stronger economies could be in danger of becoming embroiled in the debt crisis.

The currency pared early losses in forex trading today, but it remains near a seven-month low versus the dollar at $1.3680, Reuters reports.

Demand from the Middle East for euros has so far helped to stabilise the currency, but further instability is definitely likely over the coming weeks.

"Any news that brings Greece closer to bankruptcy or a debt restructuring will put the euro under more downside pressure," said Niels Christensen, currency strategist at Nordea in Copenhagen.

Meanwhile, China began distancing itself from the eurozone debt crisis last week, with Chinese Premier Wen Jiabao stating that European economies must "put their own houses in order".

His comments sparked a significant increase in safe-haven trading, resulting in rises for both the yen and US dollar, but further reductions for the euro.

Posted by Andrew Johnston