Q&A: Why sovereign debt crisis “weakens the euro”?

Question by : Why sovereign debt crisis “weakens the euro”?
I read inside the financial information now which the much reported sovergein debt crisis (greece etc) has led with the euro weakening inside value over the course of the year however, no explanation was provided. Why is this?

Best answer:

Answer by simplicitus
People detest uncertainty:
http://en.wikipedia.org/wiki/Risk_aversion
http://en.wikipedia.org/wiki/Foreign_exchange_market#Risk_aversion_in_forex

So simply because of the brouhaha over Greece, plus with a lower extent Spain, Portugal, plus Ireland, folks are unsure regarding the Euro so the Euro is losing value relative with the dollar plus yen. This really is despite the truth which Greece is a rather little piece of the euro-zone economy
http://www.economist.com/blogs/freeexchange/2010/02/european_debt_worries
plus which the big ingredients of which economy, including Germany, are doing well.
http://www.bbc.co.uk/news/business-10962017

Needless to say, it is actually potential which the difficulties with Greece have merely underlined the lengthy expression issues of the Euro plus which markets are reacting to this,
http://www.nytimes.com/2010/05/07/opinion/07krugman.html
yet which is not probably – foreign exchange markets are notoriously short-term plus speculative instead of extended expression.
http://www.twnside.org.sg/title/nar-cn.htm

What do you think? Answer below!


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