Euro at four-year low after German crackdown

Germany's move to ban naked short-selling of some securities rattled investors yesterday, with the euro falling to its lowest level in more than four years against the United States currency.

In naked short-selling, a trader sells a financial instrument short, betting that its price will fall, without first borrowing the instrument or ensuring that it can be borrowed, as would be done in a conventional short sale.

The New Zealand dollar was trading at 5pm at US68.56c, down US1.01c and the lowest level since March 5.

The Australian dollar fell to an eight-month low as a drop in domestic consumer confidence lowered demand for the currency.

Although the Westpac Melbourne Institute survey was blamed, the European volatility helped trigger the Australian dollar falling 2.75% from its Tuesday close.

Germany announced a ban that covered some high-risk bets of euro-denominated government bonds, credit default swaps based on those bonds and shares in Germany's 10 top financial institutions.

Analysts said Germany's regulation would do little to help fix Europe's debt crisis and the ban had left foreign exchange as the only market where investors were free to bet against European assets.

The euro has fallen 15% against the dollar so far this year, hammered by concerns that Europe's debt problems and austerity measures could hamper the euro zone's economic recovery.

 

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