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No end in sight for euro's slide

By Julianne Pepitone, staff reporter

NEW YORK (CNNMoney.com) -- The euro got no relief Tuesday, continuing its steady slide amid a global stock sell-off as worldwide concerns weighed on the shared currency.

The euro has taken a huge hit recently, sliding toward parity versus the U.S. dollar, as debt concerns in European countries have left investors unsettled. The pressure continued Tuesday as global markets took a dive, sending investors to the safe-haven greenback.

Click the chart to view other foreign exchange rates.

The zone's currency is down more than 15% year-to-date against the dollar, and it's fallen almost 10% over the last month alone. The euro has been entrenched in its downward spiral for several weeks, and even major moves have failed to put a floor under the currency.

Bailout optimism wanes: Earlier this month, the euro got a boost after European Union officials met May 9 to discuss problems in debt-choked Greece and to approve a $1 trillion rescue package with three main components.

The biggest provision provides nearly $570 billion for government-backed loans, with the aim of shoring up confidence in shaky credit markets.

That plan is meant to throw the weight of larger, stronger economies such as Germany and France behind weaker members of the European Union, such as Greece, Portugal and Spain.

Global stocks surged, the euro soared and investors seemed optimistic that the bailout would stem debt contagion in the euro zone. But that quickly faded -- just one week after the EU announced the rescue package, the euro plummeted to four-year lows.

Investors' attention turned back to long-term problems on the Continent as troubling news trickled out of European nations. For example, Germany announced plans to ban "naked" short selling on some European bank stocks and government bonds of debt-ladened euro zone countries.

Traders saw this as an indication that the troubled nations are not yet out of the woods. The concerns have continued to weigh on the euro, and there is some speculation that the European Central Bank may move to intervene in the currency market -- which it hasn't done since 2000.

What experts are saying: "It's abundantly clear that the euro is under pressure, but frankly, I think the concerns are overblown," said Brian Dolan, chief currency strategist at Forex.com.

Though a moderate degree of concern is to be expected, Dolan said, typical to "the broader concern of global recovery being threatened by Europe's stagnation is too much."

Europe's growth estimates for 2011 and 2012 were weak even before the debt contagion concerns sprung up, Dolan noted.

"You've got to remember the euro's long-term average is $1.18," Dolan added. "Given that, plus the zone's debt and growth outlook, it's right that the euro should not be a strong currency."

Outlook: The euro will hit technical levels at $1.22 and $1.215, Dolan said, and hitting those marks would likely prompt a sell-off to $1.17 and $1.18 "in relatively short order."

Despite the recent decline, the euro won't reach parity against the dollar until 2011 or 2012, Dolan said.

Tuesday's exchange rates: The dollar was up 0.2% on the euro to $1.2345, paring gains seen earlier Tuesday as U.S. stocks rallied from session lows in afternoon trading.

The greenback jumped 0.1% versus the British pound to $1.4405. But it was down 0.1% against the Japanese yen at ¥90.19. To top of page

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