Thursday, January 5, 2012

Euro drops to 16-month low over bank concerns

The euro has dropped to its lowest rate against the dollar in 16 months as concerns continue over the health of Europe's banks.

The euro fell to $1.2831 against the dollar and was at an 11-year low versus the yen.

Markets were unsettled after France's cost of borrowing rose and a Spanish minister suggested its banks may face a higher bad loan bill.

Bank stocks dropped, with shares in Italy's UniCredit at a 19-year low.

Luis de Guindos, Spain's economy minister, told the Financial Times that its banks may face up to 50bn euros ($64.2bn, £41.3bn) in new bad loans - higher than previous public estimates by the government.

Later on Thursday, Spain will unveil more austerity measures.

French bank stocks fell, with Societe Generale down 4.8% and BNP Paribas down 4.1%.

Germany's Commerzbank and Deutsche Bank both fell more than 4%.

Spain's Santander dropped 3.3%. UniCredit fell 10% and its shares were suspended for the second day in a row. Read More