Speculation that Germany is prepared to allow Greece to default had investors fleeing the euro in trading in London and New York today. At one point in New York this morning, the euro retraced to a seven-month low against the dollar falling below $1.3600 before rebounding slightly later in the day.
Uneasy investors also punished global stock markets with the German DAX closing down 2.2% while the CAC 40 in Paris closed more than 4 percent lower on the day. In New York, the Dow Jones Industrial Average shrugged off early morning declines and by 4 pm in New York, was up about half a percent.
The turnaround in the euro has the hallmarks of classic profit-taking. After a rapid decline of nearly 1.5 percent earlier in the day, traders bought the euro to cover their profitable shorts with the increased demand leading to a partial recovery.
