It's a mystery that has currency experts scrambling for answers.
Given the breath-taking carnage in euro-zone bond markets, why is the euro still trading in the $1.30s versus the U.S. dollar?
After all, Greek government bonds collapsed this week, building on the rout that had already forced Greece to request the activation of the joint European Union-International Monetary Fund aid package.
The spread between 10-year Greek and German bond yields stretched to more than 10 percentage points at one point while sharply rising Portuguese and Spanish yields signaled that investors were beginning to get really nervous over the idea Greece could be forced to restructure or default on its debt, triggering a run on debt-strapped members of the offensively-acronymed PIIGS fraternity, made up of Portugal, Italy, Ireland, Greece and Spain.
But while the yield premium demanded by investors to hold peripheral euro-zone bonds rather than German bunds soared over the past month to levels unseen since the single currency's debut, the euro is down just 1.8% versus the dollar over the same period, noted strategists at RBC Capital Markets.
The euro (CUR_EURUSD 1.3280, +0.0040, +0.3021%) first came under pressure late last year as worries about Greece's fiscal position began to mount. The single currency has lost nearly 20 cents versus the U.S. dollar since trading above the $1.50 level in December. On Thursday it notched a new one-year low at $1.3112.
But the roughly five-cent drop seen since the euro's April 12 high has been about on par with the slide seen in the first two weeks of December or the last two weeks of January. Given the intensification of the credit market rout, "should euro/U.S. dollar be 10 big figures lower?" asked the RBC strategists, Elsa Lignos and Adam Cole, in a research note....MORE