LONDON: The euro nosedived under 1.25 dollars on Friday, striking a new 14-month low, and equities slumped as markets were slammed by fresh concerns about the eurozone financial crisis, dealers said.
Paul Volcker, a special adviser to President Barack Obama and a former Federal Reserve chairman, spooked markets late Thursday when he warned of the "potential disintegration of the euro," according to analysts.
At 0917 GMT, the shared European unit staggered to 1.2465 dollars, striking a level which was last seen on March 4, 2009.
European stock markets also headed lower, with Frankfurt dropping 1.03 percent, London sliding 1.45 percent and Paris plunging 2.37 percent. Madrid meanwhile slumped by more than four percent in value.
"Clearly, I think we have to say that the euro failed and fell into a trap that was evident at the beginning," Volcker said at an event in London late on Thursday.
"I think Europe's going to have to decide in the end whether to get more integrated or to get less integrated, in which case the euro is the question."
Derek Halpenny, economist at The Bank of Tokyo-Mitsubishi UFJ in London, expressed his amazement at the comments.
"It is quite something for an official from the US administration, Paul Volcker, to openly discuss his view of a 'potential disintegration of the euro' and this will surely not go down well amongst eurozone officials," he said.
"But judging from the comments by ECB President Trichet that the eurozone needs 'fundamental changes', it may be that Trichet privately shares Volcker's view."
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Europe woes not over yet: CLSA ( Read Our 1500th post given about CLSA)
With its USD 1 trillion rescue package from the International Monetary Fund (IMF) and the European Union, Europe may have managed to dodge the bullet, but the problems are not yet over, says Russell Napier, Strategist, CLSA. “The ECB wants parts of Europe to deflate. However, deflation, both politically and socially is impossible,” he says.
There has been a face off between the ECB and the European governments, he says, adding that the crisis could have been as big as Lehman. However, now, the risk is much lower than last week.
On India, Napier says, it is time to be cautious on Asian equities. “West is at the bottom of the credit cycle and China, along with India, is near the top of it,” he adds.
With a long-term bullish outlook on India versus China, he says the equity capital is over committed to Asia.
Src: Economictimes, MOneycontrol etc