Euro set to end year on sour note; more pain ahead

30/12/2011 07:42 AST

The euro was poised to end a roller-coaster year on a downbeat note with an overnight break below crucial support levels boding ill for the year ahead, which again looks set to be dominated by the euro zone debt crisis.

Over the past year the euro has shed more than 3 percent on the dollar, adding to a 6.6 percent decline in 2010. On Thursday it broke below support at this year's low and sank to a 15-month low of $1.2858. It later recovered in Asia to $1.2943.

Still, battered by the lack of a comprehensive policy response to the crisis, Italian bond yields nearing levels seen as unsustainable and the dollar-funding crunch faced by cash-starved European banks, the currency could drop as low as $1.20 by the end of 2012, analysts said. "The euro has moved in clear waves since the Lehman crisis, so the only downside objective that makes sense for the year ahead is its 2010 low of $1.1876," said Teppei Ino, a currency analyst at the Bank of Tokyo-Mitsubishi UFJ.

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