Euro tumbles as Asian funds shun EU chaos

It tumbled to 0.7882 against sterling today, the lowest since late 2008, overpowering efforts by the Bank of England to weaken the pound with its latest £50bn burst of quantitative easing.

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The euro has been remarkably resilient since the EMU debt crisis first kicked on in Greece -- though it has fallen 6.5pc in trade-weighted terms over the last year, mostly against the yen and the yuan. Powerful global forces explain the paradox.

The central banks of East Asia, Russia, and the Gulf continued to buy eurozone bonds, diversifying a chunk of their $10 trillion foreign reserves away from the dollar. As the troubles escalated in Club Med they merely rotated into German, Dutch, and French debt, keeping the money in euros.

At the same time, European banks have been repatriating funds from across the world in a frantic effort to shore defences at home. Athanasios Vamvakidis from Bank of America said they have slashed overseas assets by $4 trillion since 2008, switching a large chunk into euros.