The euro extended its decline to a seven-week low against the dollar in the European trading session after Italian two-year and five-year government-bond yields soared to euro-era highs. Italy is the third largest bond market in the world and its inability to meet its target sale indicates that investors are losing confidence in Europe and its ability to deal with the debt crisis. Sentiment was already weak after German Chancellor Angela Merkel reiterated her opposition to proposals for common euro-zone bonds at a summit with the leaders of France and Italy on Thursday. Adding to bearish sentiment was a report showing consumer sentiment in France, which is the euro zone’s second-largest economy, slid to the lowest level since February 2009. EURUSD fell to 1.3211 from the European open of 1.3314. On the day, euro/dollar has lost 1.04 percent and 2.4 percent on the week.
The US dollar rose to a seven-week high versus a currency basket as investors sought the liquidity and perceived safety of the U.S. currency. The greenback is used as a global reserve currency. The Dollar Index, which ICE (Intercontinental Exchange) uses to track the U.S. currency against those of six major U.S. trading partners, advanced 0.5 percent to 79.497.
Dollar rose 0.8 percent against the Swiss franc today to hit a high of 0.9292, the highest since October 6. Since Wednesday, USDCHF has climbed 1.7 percent after a poor German bond auction set off sharp risk aversion in the markets.
Sterling fell for a fifth day versus the dollar as more disappointing UK data was released today on the housing market. An industry group reduced its outlook for U.K. house prices. On Thursday a UK growth report signaled the economy will slow down in the fourth quarter. GBPUSD fell to a new seven-week low of 1.5422. On the week the pound fell 2 percent against the dollar. Against the weaker euro, sterling gained 0.8 percent as EURGBP fell to 0.8544 from 0.8610.
Against the yen, the dollar jumped to 77.72 from the Asian open of 77.07 due to comments from Japanese Finance Minister Azumi who said that he would not hesitate to intervene again in order to curb yen strength. EURJPY was also lifted after the comments but fell again to reach a low of 102.48 in European trading from the open of 103.02 as euro sentiment is predominantly bearish.