Euro consolidated losses during the Asian session after declining by over 1 percent on Wednesday, falling below $1.24 for the first time in two years. The euro was poised for its biggest drop in eight months driven by euro zone debt woes, over Greece and Spain. In recent days, Spanish bond yields surged to record highs, raising fears that the country will probably need an international bailout as its fragile economy and ailing banking sector make it impossible to cut deficit. EURUSD touched a low of 1.2357in Asia, the lowest since June 2010.
The Swiss franc plummeted to a fifteen-month low against the dollar as Spanish banking problems weigh heavily on risk appetite, thereby lifting the safe haven dollar. USDCHF hit a high of 0.9718 in Asia, the highest since February 2010.
Sterling fell against the dollar on risk aversion. GBPUSD edged lower in Asia falling to 1.5461, reaching a new four-month low.
Yen gained more strength due to safe haven demand, as Europe’s sovereign debt crisis and baking sector concerns prompted investors to flock to the safe-haven currency. Japanese Finance Minister Jun Azumi said he is closely watching excessive moves in the yen. USDJPY hit its lowest levels in 3-1/2 months against the dollar, at 78.70 yen. EURJPY fell to 97.34, the lowest levels since January.
The Australian dollar weakened further as high yielding aussie sold off on escalating risk aversion. AUDUSD slid to 0.9671, a new six–month low. Focus turns to the Reserve Bank of Australia policy meeting next week to see if the bank will cut interest rates, which could further weaken the aussie.