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Concerns over health of Europe's banks sees euro drop to lowest rate against dollar in 16 months.
Sustained concerns over the health of Europe's banks have seen the euro drop to its lowest rate against the dollar in 16 months, the BBC has reported.
The beleaguered currency fell to $1.2831 against the dollar after rising French borrowing costs and a suggestion from Spain’s new economy minister that Spanish banks may face up to €50 billion in new bad loan provisions unsettled markets.
Spain will unveil further austerity measures later today. The euro also fell to an 11-year low against the yen, Bloomberg reported.
More from GlobalPost: EU leaders warn of difficult 2012
Shares in Europe’s banks slumped on Thursday, according to the Wall Street Journal. In Frankfurt, Deutsche Bank and Commerzbank shares dropped around 4.5%, while in Turin shares in Intesa Sanpaolo dropped 6.5%.
French banking giants BNP Paribas, Société Générale, and Crédit Agricole were also trading 3.6%, 4.7% and 3.3% lower today respectively, with ratings firm Standard & Poor’s December 2011 warning of downgrades across the 17-member eurozone spooking markets and raising concerns that France may lose its triple-A credit rating, according to the Wall Street Journal.
France managed to sell off close to its target of nearly €8 billion of bonds today, with the auction representing one of Europe’s first major market confidence tests of 2012, the New York Times reported. However, demand for its 10-year bonds fell sharply and interest rates were up on last month.
Eurozone governments need to sell more than €250 billion of debt in the first quarter of this year, although efforts last month to bolster the eurozone failed to satisfy investor concerns over the bloc continuing debt crisis and the currency’s future.