Euro weakens for second day against US Dollar

Published: Wednesday, 16 January 2013 18:00 BST - Written by Ben Hughes

STORY LINK Euro weakens for second day against US Dollar

Euro weakens for second day against US Dollar

The Euro has weakened against the US Dollar for a second straight day as optimistic comments made by the European Central Bank gave way to profit taking and growing concerns over the Eurozone’s economy.

The Euro weakened against the US Dollar due to taking losses against its safe-haven currency rivals. Federal Reserve Chairman Ben Bernanke’s comments on the slow pace of the US economic recovery led investors to shift their funds to less volatile assets.

The currency then briefly turned positive after ECB member Ewald Nowotny said the exchange rate was "not a matter of major concern", a strong contrast to comments from Euro group head Jean-Claude Juncker who yesterday prompted investors to sell the Euro by saying it was "dangerously high".

Nowotny's comments temporarily supported the Euro, but that faded quickly as positive earnings in the U.S. supported the U.S. growth outlook story and contrasted with what is going on in the Eurozone. Weak economic data out of the currency bloc highlighted the differences between the region (which continues to struggle) and the United States which is showing signs of recovery.

If economic data continues to show negativity for the Euro then the European Central Bank could opt to implement further rate cuts, leading to further losses for the currency. The Euro had climbed to its highest level in 20 months earlier this week after the ECB dashed expectations of a near-term rate cut and the yen weakened as Japanese officials ramped up pressure on the Bank of Japan to ease monetary policy aggressively and weaken the currency.

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