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Forex - EUR/USD sags in early Asian trade

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Forexpros - The euro extended losses against the U.S. dollar Thursday, as investor concerns of European debt insolvency turned to France and the threat of a credit ratings downgrade for the euro-zone's third largest economy.

EUR/USD hit 1.4258 in early Asian trade, the pair's highest since Tuesday; the pair subsequently consolidated at 1.4218, dropping 0.15%.

The pair was likely to find support at 1.4105, the day's low, and resistance at 1.4426, Monday's high.

Market rumors circulated earlier in the week that over-exposed French banking institutions may be in danger of credit rating downgrades, a contagion that could spread to the nation's central bank.

Institute of International Finance Managing Director, Charles Dallara, said Thursday that markets were over-reacting to concerns that French banks might suffer from exposure to their nation's sovereign debt.

France, Italy, Belgium and Spain have announced new bans on short positions beginning Friday, according to the the European Securities and Marketing Authority. The ban will be instituted in order to "restrict the benefits that can be achieved from spreading false rumors" following recent volatility in European markets, the ESMA said.

The moratorium on short-selling would serve to protect key French financial institutions including BNP Paribas, Societe Generale and Credit Agricole. SocieteGenerale saw its shares plummet by 14.7% in Wednesday trade, even as it vehemently denied market rumors that France's credit rating was in danger of a downgrade.

Meanwhile, the euro was lower against both the British pound and the Japanese yen, with EUR/GBP slipping 0.13% to hit 0.8758 and EUR/JPY down by 0.09% to hit 109.24.

French President Nicolas Sarkozy and German Chancellor Angela Merkel were scheduled to meet next week to discuss Europe's sovereign-debt crisis.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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