Forex Pros – The euro fell to a four-day low against the U.S. dollar on Wednesday, after Moody’s downgrade of Portugal’s credit rating to junk status sparked fresh concerns over sovereign debt contagion in the euro zone.
EUR/JPY hit 116.18 during European morning trade, the pair’s lowest since June 30; the pair subsequently consolidated at 116.25, shedding 0.60%.
The pair was likely to find support at 115.11, the low of June 28 and resistance at 117.60, Tuesday’s high.
Late Tuesday, ratings agency Moody’s downgraded Portugal’s credit rating by four notches to Ba2, warning that the country may need a second round of rescue funds before it can return to capital markets.
Following the downgrade, the cost of insuring Portuguese government debt against default jumped, to hover just below a record high.
But the single currency remained supported by expectations that the European Central Bank will raise interest rates again at its monthly policy meeting on Thursday, after ECB President Jean-Claude Trichet said last week that the bank was in “strong vigilance mode.”
The euro was also lower against the Swiss franc, with EUR/CHF slipping 0.07% to hit 1.2119.
Also Wednesday, official data showed that the euro zone’s economy grew in line with preliminary estimates in the first quarter of 2011, expanding 0.8%.
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