Forex Pros – The euro was down against the yen on Thursday, falling to a five-day low after Moody’s Investors Service cut Spain’s government-bond rating by one notch.
EUR/JPY hit 114.34 during European morning trade, the pair’s lowest since March 3; the pair subsequently consolidated at 114.74, shedding 0.28%.
The pair was likely to find support at 113.08, the low of March 3 and resistance at 115.25, Wednesday’s high.
Moody’s downgraded Spain’s sovereign debt to Aa2 from Aa1 with a negative outlook and warned of further cuts, saying plans to bail out the country’s banking sector will cost more than twice what the government expected.
Spain’s government and central bank have forecast no more than EUR20 billion would be needed to recapitalize weak banks.
But Moody’s said the overall cost was likely to be closer to EUR40-50 billion. In a more stressed scenario recapitalization needs could even rise to around EUR110-120 billion, it said.
The downgrade added to pressure on the single currency, amid renewed concerns over the sovereign debt levels of peripheral euro zone nations.
The euro was also down against the Swiss franc, with EUR/CHF slipping 0.15% to hit 1.2908.
Earlier Thursday, official data showed that Japan’s economy contracted more than the government initially estimated in the fourth quarter because of a downward revision to capital investment and consumer spending.
ForexPros.com
