Reuters: US Dollar Report: FOREX-Euro falls to 2-year low vs dollar on Spain fears

Reuters: US Dollar Report Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

FOREX-Euro falls to 2-year low vs dollar on Spain fears Jul 23rd 2012, 19:02 Mon Jul 23, 2012 3:02pm EDT * Spanish bond yields jump to new highs, edging towards 8 pct * Euro poised to take out key $1.20 area, mid-2010 low $1.1875 eyed * International lenders to arrive in Athens Tuesday NEW YORK, July 23 (Reuters) - The euro fell to a two-year low against the U.S. dollar and a nearly 12-year trough against the yen on Monday on fears Spain is edging closer to needing a full-scale bailout that the euro zone cannot afford to give. Ten-year Spanish bond yields jumped as high as 7.596 percent, the highest since the euro was created in 1999. That saw the euro drop for a fourth straight day against the dollar to hit a low of $1.2067, the weakest since June 2010. Traders and analysts say the euro looks poised to take out the key $1.20 threshold. A break beneath could see the currency head towards its June 2010 low of $1.1875, which marked the weakest since March 2006. "With the 10-year yield above 7 percent and quickly approaching 8 percent, we're at that moment where it starts to look a lot more real than it was even just a few weeks ago," said John Doyle, foreign-exchange strategist at Tempus Consulting in Washington, referring to a full-scale sovereign bailout for Spain. Adding to pressure on the euro was a weekend report that the International Monetary Fund may refuse to contribute further funding for Greece. The IMF dismissed the report, saying it was "supporting Greece in overcoming its economic difficulties." The European Central bank, the European Commission and the International Monetary Fund -- known as the troika -- will arrive in Athens on Tuesday to push for further cuts needed for the country to qualify for further rescue payments. The euro last traded at $1.2125, down 0.3 percent. After closing at $1.2156 in New York on Friday, it "gapped" lower to open at $1.2120 in Asia on Monday morning, signifying the market perceived the value of the euro had dropped over the weekend in response to events in the euro zone. Some $6.41 billion of euros have changed hands on Reuters Dealing through the Monday session. Against the yen, the euro dropped to 94.22 yen, a level not seen since late 2000. Weakness in the euro was across the board as it also hit a record low versus the Australian dollar, a more than 3-1/2-year low against sterling and a 9-1/2-year low versus the Norwegian crown. FUNDING STRAINS Tiny Murcia was on course to be the second Spanish region to request help from the central government, and media reported half a dozen local authorities were ready to follow in the footsteps of Valencia. Spanish media believe six regions will now seek help after the announcement by the heavily indebted Valencia rattled markets on Friday, complicating Madrid's efforts to avoid a full-blown bailout. Catalonia, Spain's biggest region by gross domestic product, also has the highest debt. It said this week it had not decided whether to tap the funding mechanism, though it is an increasingly likely candidate. Axel Merk, portfolio manager of the $500 million Merk Hard Currency Fund in Palo Alto, California, said the market is pricing in the reality that "the Spanish government is now clearly on the hook for the regions' debt. "Spain's central government is expected to bail out its regions - and in return may ask for a bailout itself," he wrote to clients. "As long as debt is merely shuffled around, the euro zone crisis won't be solved. And as long as ever more guarantees are provided - from regional to national governments, from supranational issuers such as the European Stability Mechanism (ESM) to the International Monetary Fund, the more the global financial system as a whole may be at risk." Italy may be under similar pressure, with a newspaper quoting unnamed government specialists as saying that 10 Italian cities including Naples and Palermo face problems managing their finances. The dollar fell to a seven-week low of 77.95 yen, before rebounding to 78.43, little changed on the day. Japan's vice finance minister for international affairs was reported as saying the country will not exclude any options when responding to excessive currency moves, although traders said the authorities were unlikely to consider intervening while the dollar held above 76 yen. Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions