Forex Asia Review – Euro under pressure as Spanish bond yields approach record highs

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Euro extended its decline early in the Asian session as focus turns to the Spanish debt crisis. Concerns over the cost of rescuing Spain’s fourth largest bank, Bankia, caused Spanish bond yields to surge to record highs at 6.5 percent on Monday, approaching levels that put the country at risk of requiring a bailout.

 

The focus turns to a debt auction by Italy later today on 5-year bonds and 10-year bonds tomorrow. This will be closely watched since Italy is the third largest economy in Europe and has growing debt.

 

EURUSD opened in Asia at 1.2539 and was sold off early pushing it down to 1.2508, near a 22-month low of 1.2495 reached last week. Euro has lost over 5 percent this month and is heading for the biggest monthly loss since September 2011.

 

EURJPY fell to 99.49 yen after having lost 2 percent since a week ago and near a four-month low of 99.34 yen hit last week.

 

USDJPY was little changed during the Asian session, trading between 79.40 and 79.63. The dollar has been struggling to gain against the yen since the Bank of Japan suggested in its policy meeting minutes released on Monday that it was taking a less aggressive stance on policy easing measures.

 

The Australian dollar held steady against the greenback during Asian trading. After an initial sell-off, the aussie regained losses to close back near the session open levels. AUDUSD traded between lows of 0.9801 and highs of  0.9856.