24 March 2011Euro falls amid Portuguese crisis
NEW YORK: The Portuguese parliament's rejection of a crucial financial reform package sent the euro falling against the dollar Wednesday as the government appeared to collapse.
Prime Minister Jose Socrates followed through late Wednesday with his resignation after legislators rejected his tough austerity programme, aimed at avoiding a multi-billion euro bailout like those received by Greece and Ireland last year.
The euro dropped sharply amid expectations that Socrates' minority government would not be able to carry off the deal.
Around 2100 GMT (5am Singapore time) shortly after Socrates' resignation announcement, the euro traded at $1.4083 compared to $1.4196 at the same time Tuesday.
"Portugal's precarious financial situation means that a political crisis could not come at a worse time," said Kathleen Brooks at Forex.com.
"While a bailout of Portugal by itself wouldn't be enough to spook the markets, it could derail the EU summit," the said.
The European Union is to meet on Thursday and Friday to decide on a permanent eurozone debt rescue mechanism.
"The Portuguese vote and the EU meetings will effectively decide whether the euro can sustain its recent gains, and our bias is towards increased euro vulnerability," said Vassili Serebriakov, a currency strategist at Wells Fargo bank.
The dollar meanwhile was unchanged against Japan's currency at 80.93 yen, and picked up ground against the pound, which was trading at $1.6233 from $1.6370 Tuesday.
The dollar traded lower with the Swiss franc, to 0.9084 francs from 0.9034.
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