Irish Debt Concerns Grow Despite Well Subscribed Portuguese Debt Auction

The Greenback's resilience against all the other major currencies last week came about in part due to the uncertainty in the European Union over Irish debt as Credit Default Swaps for Irish sovereign debt topped and remained above 600 bps last week. CDSs for the debt of some other European countries also widened considerably.
Concerns in the financial markets over the possible Irish debt situation prompted a wave of risk aversion which gave the Greenback considerable strength even against the commodity currencies in spite of gold making a new all time high yet again last Tuesday.
The Euro fell considerably against the Greenback from the beginning of the week as EURUSD came off of its weekly high of 1.4085 after the market was abuzz with talk of a Greek style default on Irish debt.

Euro Finds Support After Portuguese Bond Auction

The rate then consolidated somewhat on Wednesday after the results of a Portuguese bond auction raised 1.24B Euros in six and ten year bonds, which was at the top end of the expected range of 0.75B - 1.25B Euros.
Alberto Soares, the President of Portugal's debt agency stated after the auction that,
"Demand was there, yields were below the secondary market, so that's why we decided to go to the top of the range."
 Also, when addressing speculation that Portugal might tap the EU for another bailout, Soares added that,
"From the point of view of the Portuguese debt management agency, were committed to maintaining our funding through the market."

LCH Clearnet Requires Additional Margin for Irish Sovereign Debt Positions

Also on Wednesday, London clearinghouse LCH.Clearnet announced that it had decided to require an additional 15% margin on positions of Irish sovereign debt.
This worrisome news prompted a bank run in Ireland on the same day and saw the Euro extend its decline versus the Greenback even further.

Ireland Announces Austerity Package but Bailout Rumors Persist

On Thursday, Ireland announced that it would increase its spending cuts package and tax increases by more than double in order to bring down its huge budget deficit.
This news sent the yield on the Irish 10 year bond up to 9 percent on Friday, which further widened the spread against the comparable German Bunds that are currently yielding only 2.5 percent.
Directly affected by the Irish debacle were the borrowing costs in Spain, Greece and Portugal, which all increased considerably as investors grew wary of the possibility that these financially troubled countries may also default on their debt.
Nevertheless, the prospects of Ireland bringing down its budget deficit to the target level of 3 percent of GDP by 2014 seems somewhat unlikely since the Irish deficit currently runs at 32 percent of GDP.
Friday then saw the Euro make its weekly low of 1.3573 after the yield on Irish 10 year bonds soared to over nine percent, and rumors persisted in the market that Ireland was to receive an 80B Euro bailout package from the IMF and the EU.