Recent depreciation in regional currencies was sparked by renewed concerns about sovereign debt in Europe, says Prasarn Trairatvorakul, the governor of the Bank of Thailand.
The decision by Standard & Poor's to downgrade its outlook on Italy's sovereign credit rating from stable to negative has caused anxiety that it could follow Greece, Portugal and Ireland into a debt crisis. The euro was trading at $1.410 yesterday, after weakening to a two-month low of $1.397 on Monday, but analysts expected the rebound to be short-lived. Some foresee the currency heading down toward $1.30 if Greece's troubles worsen.
Dr Prasarn said markets were also worried that more information about Spain's financial condition would emerge ahead of the election in 2012.
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