The Euro is suffering in the global economy, dropping to its lowest point in more than two years against the American dollar.  Part of the drop has been caused by speculation that the European Central Bank (ECB) will go ahead and cut interest rates in an effort to lessen the effects of a global credit crisis.  The decline, for a third day in a row, happened prior to a report that was released from Germany stating that economists are forecasting consumer confidence.  The last time the Euro was this low was in 2003.  Jean-Claude Trichet, the president of the ECB announced to the media that borrowing cost cuts could come as early as next week.  Even as the Euro dropped, the yen ended a five day gain on the dollar which made economists speculate that Japan’s central bank will sell its own currency, the first time this has happened since 2004.

Says currency strategist Lee Wai Tuck at Forecast Pte Ltd. in Singapore, “There are a bit more concerns over the European economic slowdown and there may be a rate cut.  People are selling the euro.”  The Euro has weakened against 14 of 16 of the most active international currencies.

The European economy is also on the brink of a recession and the manufacturing and service industries are contracting at a brisk pace.  German business confidence has dropped to a five year low and investors feel that the ECB will lower borrowing costs even further by June.  They cut the main refinancing rate by a half point to 3.75 percent on October 8.  Germany is not the country having issues as Japanese Finance Minister Shoichi Nakagawa announced to the media that the abrupt currency movements are very unwanted.  He declined to comment on how the Japanese government will intervene in the foreign-exchange market.

The G7 announced that they were concerned about the yen’s ‘excessive volatility’.  “There are fears of possible intervention by the Japanese authorities, so the yen is being sold,” claims Yuki Saito who is the head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s second-largest bank by market value. The G7’s French Finance Minister Christine Lagarde stated that any intervention will be by Japan and they denied that the G7 nations would collectively sell the yen.

Governments all over the world are putting measures into place to help curb the insane currency swings that have been happening.  The Reserve Bank of Australia bought back its own currency for the third day in a row after dropping against the dollar.  The Australian Central Bank came in and intervened in the market according to an anonymous source.