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EUR Stronger with Spanish Bailout

EUR Stronger with Spanish Bailout

Spain became the fourth euro member to seek a bailout since the start of the region’s debt crisis more than two years ago with a request for as much as €100 billion to rescue its banks. Just seven months after winning a landslide victory, the Spanish government was forced to abandon its bid to recapitalise their banks without external help as international investors slashed their holdings of Spanish debt amid concerns over bad bank loans drove borrowing costs to near euro-era records.

This move means Spain has a firewall in case the Greek election on June 17 unleashes a fresh round of market turmoil. Spain’s bonds have slumped since the government announced the nationalisation of one of its banking groups last month, sending the yield on 10-year bonds close to the euro-era high of 6.78 percent on May 30.

In summary the euro strengthened following the Spanish bailout news, hitting a high of $1.2671 against the US dollar in Asian trading before easing back to around $1.26 early this morning. Sterling also recorded gains against the USD rising almost a cent since the close in London on Friday and currently trading above the $1.5525 level. GBP/EUR fell slightly.

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