Euro falls against greenback as loan program begins

Posted On: February 29, 2012
Wednesday saw the value of the common currency of the European Union drop against the U.S. dollar as the European Central Bank opened a loan program to provide embattled euro zone banks with liquidity, Bloomberg reports.

The long-term re-financing operation on Wednesday follows a similar program from this past December, both of which aim to control damages caused by the sovereign debt crisis. The loan program delineates three-year terms and has more than 529 billion euros available, which is roughly equal to $713 billion.

"You can't argue with 529 billion," Peter Chatwell at Credit Agricole CIB told Reuters. "It's undoubtedly positive for risk assets and also will help to support core markets as initially banks need somewhere to store the resultant excess liquidity."

But, as a consequence of the banks being flooded with liquidity, the embattled euro slipped against the majority of its rivals. The ECB program that was activated on Wednesday is set to assist as many as 800 banks with loan money while the December program benefited 523 banks.

The combined firepower of both the December and Wednesday programs totals more than a one-trillion euro injection into the financial system, according to Reuters.

Category: Industry News


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