Euro Falls Amid Fears Of A Credit Rating Downgrade For Spain

The Euro has fallen against the US dollar today as Moody’s warned of a possible downgrade of Spain’s credit rating.

The announcement, made by financial analysis agency Moody’s, said that the credit rating of Spain was under review following growing concern over the country’s debt and funding needs for 2011.

The euro fell to a low of 1.2288 against the US dollar as the news broke and the Dow Jones Index dipped 75 points, reflecting market concern that Spain may be next in line for an EU bail-out.

The news comes at the close of a year in which Spain has dragged itself out of its worst recession in half a decade.

The country reported a growth rate of a mere 0.1 percent in its first quarter and now faces a tough austerity budget in an attempt to reduce its debt.

“News that Moody’s has put Spain’s debt rating on review has knocked the euro,” said Jane Foley, analyst for Rabobank.

“It plays on fears that contagion could extend to the Spanish bond market, though it does not enlighten the market much further with respect to the underlying issues with respect to Spain.”

Market focus has been on Spain since Ireland was forced to accept an EU bail-out package of 85b euros last month.

Madrid however, denies any similarities between the two economies and believes the austerity measures will help the country avoid accepting any EU assistance.

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