The euro slipped from its four month high on Wednesday and continued the slide into Thursday morning after the US Federal Reserve confirmed that it would probably begin to taper its bond buying program at the end of the year.
The common currency traded at $1.3252 on Thursday morning as investors geared up for a eurogroup meeting set to take place Thursday afternoon.
The dollar rose after Fed Chairman Ben Bernanke announced that he and his colleagues had agreed to cut back on the bank's $85 billion per month stimulus spending toward the end of this year as the nation's economy improved. The news sent the dollar higher, but put pressure on the euro and yen.
Now, investors are waiting for the results of the eurogroup meeting for more information about the region's plans to continue its slow climb out of recession. Bloomberg reported that European Union Economic and Monetary Affairs Commissioner Olli Rehn spoke at a conference in Brussels and said the group is expected to agree on terms for the European Stability Mechanism to send funds to ailing banks directly rather than via national governments.
Allowing the ESM to recapitalize banks directly could be a powerful tool in ending the region's three year recession by breaking the link between banks and government institutions. The fund could house 50 to 70 billion euros which would be available for direct recapitalization as early as autumn of 2014 if the eurogroup is able to reach an agreement and get the ball rolling.
Beginning to define the ESM's direct recapitalization tools would be the first step in creating a united banking system across the eurozone.
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