Euro extended its decline into the Asian session, reaching a two-year low against the dollar as markets keep their focus on Spain’s banking crisis and how the government can rescue the troubled Bankia, one of the largest banks in the country. As Spanish bond yields surge to record highs, the rising borrowing costs raise concern over whether Spain can raise funds easily in the debt markets or will end up needing a bailout.
EURUSD reached another low in the Asian session, touching 1.2456, the lowest since June 27, 2010. Euro has lost almost 6 percent this month and is heading for its largest monthly drop since September. Meanwhile, the uncertainty of the outcome of the Greek elections on June 17 are also weighing on the euro. Italy’s bond auction today will be in focus.
USDCHF climbed to a new 3-1/2 year high of 0.9639 as safe haven demand boosted the dollar.
GBPUSD was sold off after the bounce from a 2-1/2 low and fell back to 1.5607 in Asia.
Yen gained against the euro on safe haven demand as risk was off in Asia. EURJPY fell to 98.94, close to the four-month low reached on Tuesday. USDJPY remains stuck in a range since Monday, bracketed between a low of 79.32 and high of 79.63.
The Australian dollar weakened after worse than expected domestic retail sales data. In a risk averse market, the high yielding aussie was sold off, pushing AUDUSD, down 0.7 percent to 0.9774. The focus turns to the RBA policy meeting on June 5 to see if interest rates will be cut further in order to spur growth.