Euro broke below the key $1.25 level during the U.S. session, pressured by concerns over Spain’s debt crisis. The Spanish banking system is fragile since the country’s fourth largest lender, Bankia, asked for financial aid from the government and there is uncertainty on how the bank will be recapitalized and if the government has the funds. Meanwhile, Spain’s borrowing costs have surged this week as bond yields hit record highs above 6 percent. There are fears of a potential bailout for Spain. Euro accelerated its decline after ratings agency Egan Jones downgraded Spain’s sovereign credit rating to BB- from B.
EURUSD tumbled to 1.2460 after the news, the lowest level since June 2010, down 0.6 percent from today’s Asian session open.
GBPUSD tracked the euro lower, falling to 1.5606 in the U.S. session, the lowest since mid-March, and down 0.5 percent from today’s open.
USDCHF rose to a 3-1/2 month high of 0.9636, on broad dollar strength.
USD rose against the Canadian dollar on safe haven flows after the news of the Spain downgrade, with USDCAD climbing to a high of 1.0268. The loonie has lost almost 4 percent against the greenback this month due to falling crude oil prices, a major Canadian export.
USDJPY has been mostly trading sideways in the past one week, within a range of 79.35 – 79.81.
AUDUSD has been entrenched in a 0.9794 – 0.9896 range since in the last two days. Focus turns to Australian retail sales data due in the upcoming Asian session. Expectations are for a drop in April sales.
Gold fell over $30 today due to dollar strength, The two assets usually have an inverse price relationship. Spot gold tumbled to a low of $1,547.83 during New York trading hours.