The euro hit its five-month low against the dollar and sterling on Wednesday. Selling of the currency was widespread as it reached a decisive break under a key support level against its U.S. counterpart. The dollar rallied broadly, and was boosted as investors looked to the Massachusetts election of a Republican to the U.S. Senate as an indication that the government might curb its spending.
Commodity currencies dropped amid reports that Chinese banks have been instructed to slow lending. Some analysts report that this will slow China's economic recovery and reduce its demand for commodities.
Analysts at Tortola Capital report that the election of a Republican on Tuesday to a Senate seat may pave the way for legislative and potential to a reduced U.S. deficit. This position contrasts with the situation in Europe, where Greece's ever-increasing debts continue to raise concerns about Europe’s fiscal health.
