Forex Pros – The euro extended losses against the U.S. dollar on Wednesday, falling to a fresh five-day low after China’s central bank raised interest rates, as part of a continuing effort to curb spiraling inflation.
EUR/USD hit 1.4330 during European early afternoon trade, the pair’s lowest since June 29; the pair subsequently consolidated at 1.4333, shedding 0.65%.
The pair was likely to find short-support at 1.4141, the low of June 24 and resistance at 1.4577, Monday’s high and an almost one-month high.
The People’s Bank of China said it will raise its benchmark interest rate by 0.25%, the third rate increase this year and its fifth rate increase in the latest round of monetary tightening.
The euro had weakened broadly after ratings agency Moody’s downgraded Portugal’s credit rating by four notches to Ba2, citing concerns that the country will not be able to fully meet deficit reduction and debt stabilization targets set out in its loan agreement with the European Union and International Monetary Fund.
Moody’s said there was a “growing risk” that Portugal may need a second round of rescue funds before it can return to capital markets.
The euro was also lower against the pound, with EUR/GBP shedding 0.34% to hit 0.8952.
Also Wednesday, official data showed that German factory orders rose unexpectedly in May, increasing for the second consecutive month.
A separate report 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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