Euro down to three-week low versus dollar

The euro dropped to a three-week trough against the dollar at the beginning of the week after an audit of Spanish banks was unable to ease concerns over whether the country was set to request a bailout to bolster its embattled economy.

The independent audit published on Friday revealed that Spain’s banking sector would require 59.3bn euros in extra funds to manage its economic downturn, but the country only seems prepared to ask for 40bn euros in aid for its banks.

Investors are also waiting for news of rating agency Moody’s latest announcement on Spain’s sovereign rating, which could see the country downgraded to junk status.

State Street Global Markets’ Kimihiko Tomita said that although Spain’s bank audit’s results were not bad, worries persist about the country and Greece. Inspectors from the European Central Bank, the International Monetary Fund and the European Commission are due to meet in Athens later this week to carry out a review of the progress Greece is making with reforms.

On Saturday, two German magazines reported that Greece will be handed its next sum of international aid even though there have been shortfalls in the budget and slow fiscal progress as the eurozone does not want to see Greece exit.

The single currency was last at $1.2821, falling by roughly 0.3 per cent from levels seen in late US trading on Friday. Earlier in the day, it dropped to %.2804, crashing through support barriers at $1.2823, its 200-day moving average.