Euro Trading at a 5-Month Low on Risk Aversion - 23.5.2012

The Euro against the US dollar is trading below the 1.27 level reaching the 1.2614 support level as investors are seeking for safer currencies. European banks will incur huge losses in the case the Greece exits the euro-area, the possibility of Greece leaving the euro-area is higher after the May elections. Greek parties opposing the terms of the second bailout from IMF and the EU, increased their parliamentary power. However due to not reaching to an agreement to form a government new elections will be held on the 17 of June. The increased risk of Greece leaving the euro-area is reflected on European sovereign debt securities of the highly in debt countries as traders are avoiding riskier assets. The Spanish 10-year bond yield is at 6.11 per cent today, higher by 0.04 per cent, the 10-year Italian bond yield increased by 5.7 basis points to 5.60 per cent and the Portugal’s 10-year bond yield advanced by 10.7 basis points to 11.819 per cent while the Germany’s same maturity bond yield is 6 basis points lower at 1.406 per cent.