Euro unexpectedly drops, setting new minimum records

The Russian Central Bank has changed it currency preference in dollar's favor

The cost of the European currency lost one cent on the world market on Wednesday. On the whole, the euro has become three percent cheaper against the US dollar since the beginning of the week. It became quite an embarrassing phenomenon for financial experts: they are certain that there are no reasons for such significant strengthening of the dollar rate. The US currency continues gaining value in the world – it added 9 kopecks on the Russian market yesterday. The dollar went further up when the Central Bank of Russia set the official rate for Thursday.

Analysts are certain that the reduction of the euro cannot continue for a long time. Contrary to all expectations, though, the European currency is sliding. The trend will most likely be preserved in the near future, taking into consideration the news about the results of the EU Constitution referendum in the Netherlands.

The euro started losing its value after the publication of the voting results in France, when the majority of the French said “No!” to the European Constitution. It became a trying ordeal for both the political leadership of France (the French Prime Minister Jean-Pierre Raffarin stepped down Tuesday) and for the nation's economy too. The political news in France triggered certain economic changes in other countries of the euro-zone. The May index of consumer confidence was dropping at a larger capacity in France as opposed to expectations. The wholesale index changed for the worse in Germany as well.

The German minister for finances held a session with spokespeople for Bundestag on Wednesday. The officials discussed the unsuccessful financial policy in the European financial union. An adequate official statement will soon be released from the Bank of Germany. It was rumored that European authorities were ready to take tough measures to boost the European economy. The euro slide will become even faster, if the authorities decide to reduce the current two-percent rate in EU states. Such suppositions provoked anti-euro activities on the market and eventually resulted in the reduction of the euro rate. The euro dropped to a new minimum, updating the record data over the recent 7.5 months.

A trader of one of Russian banks believes that such situation will not last long: “The correction will definitely occur, although we do not know when it is going to happen and how fast the euro will grow. According to our forecasts, the dollar-euro rate is to make up 1,18,” the specialist said.

The Bank of Russia supported the dollar on Wednesday morning, although its pro-euro orientation was obvious before. The Bank raised the official dollar rate in Russia, which spurred the further growth of the American currency on the Russian financial market. Such new preferences of the Central Bank confused market analysts: the Bank is supposed to restrain the growth of the US dollar, for it negatively affects the inflation rate.

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Author`s name Olga Savka