Dow Jones Newswire 
Tuesday, May 18, 2010
The euro plummeted Tuesday to a fresh four-year low after Germany announced it would ban certain speculative investments, exacerbating the selling of the single currency as investors run out of alternatives to trade the sovereign debt crisis already roiling the euro zone.
The euro dropped nearly 1.5% against the dollar and fell more than 1.56% against the yen as investors already nervous over the fiscally shaky euro-zone periphery took Germany’s actions as another sign of a “flailing” response to a problem that threatens to send global financial markets into a tailspin, said Win Thin, senior currency strategist at Brown Brothers Harriman in New York.
(ARTICLE CONTINUES BELOW)
The proposal limits the options of investors looking to express a negative view on the euro-zone, said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Conn.
If investors cannot short–or bet against–German banks, euro-zone sovereign debt or insurance to protect against default on that debt, the proposal “will simply channel more investors and speculators to express a negative view in the currency,” Gilmore said. The proposal could mean “unlimited euro downside ahead,” he said.
Full story here.