After ignoring the worsening euro zone peripheral debt crisis for the last month, participants in the currency markets may finally be paying attention to it.

The yields on Portuguese, Greek, and Irish sovereign bonds surged on Thursday on fears that Greece will soon restructure its debt, which is a form of partial default that forces investors to accept some losses. 

The current value of peripheral bonds, therefore, has declined in anticipation of the restructuring.

The market has long expected Greek debt to be eventually restructured. However, the surprise is that the time may come so soon.

Whereas the market tolerated and largely ignored the bailout process of Portugal – which in some ways was a repeat of what happened in Greece and Ireland – the prospect of debt restructuring brings in a new dimension to the European sovereign debt crisis. 

This is likely the reason that the currency markets all of a sudden care now.

Since the beginning of Thursday’s European session, the euro has lost almost 1 percent against the pound sterling and Swiss franc. It has only lost about 0.5 percent against the US dollar because the latter is persistently weakened by interest rate differentials and foreign central bank selling.

Despite the euro's renewed woes, global risk appetite largely remains in intact as oil, copper, and US stocks are trading slightly higher on Thursday.

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