The euro fell against the dollar for the second straight day on concerns the euro zone debt crisis is spreading across the region. Yields on Italian benchmark 10-year bonds rose above the critical 7 percent level again today, a level considered to be unsustainable. Also Spanish yields rose ahead of the launch of a new 10-year bond launch on Thursday. The market’s optimism over the new technocrat-led governments in Greece and Italy proved short-lived as investors refocused on worries about the ability of European policymakers to contain the deepening crisis. EURUSD touched a US session low of 1.3495, falling 2.3 percent since Monday.
The British pound mainly tracked euro losses. Additionally sterling was weakened due to UK inflation data coming out lower than expected, fuelling expectations that the BOE will introduce more monetary easing. This weakens the pound. Meanwhile the dollar was further strengthened after U.S. data that showed retail sales rose more than expected in October.GBPUSD fell to as session low of 1.5798 falling 135 pips since the London session high of 1.5930.
The Swiss franc weakened against the US dollar on speculation that the Swiss National Bank will step in soon to take measures to curb franc strength. In September the SNB declared a CHF1.20 floor on the euro-franc exchange rate and some expect the floor to be raised to 1.25 francs versus the euro. This led to heavy selling of Swiss francs since yesterday. USDCHF rose to a five-week high in the US session, peaking at 0.9197.
The yen remained strong against the dollar and the euro due to its safe haven status. The euro fell to a month low against the yen, touching 103.97 in US trading. The dollar remained weak against yen, trading in a range since Monday, hovering around the lowest level since the BOJ intervention on October 31 when the bank intervened to curb yen strength. USDJPY fell to a low of 76.90.
The Canadian dollar was boosted after strong domestic data that showed manufacturing sales rose twice as fast as expected in September to the highest level since October 2008. This helped the loonie gain back some losses against the greenback as the data fuels expectations for stronger third-quarter economic growth. The Canadian dollar gained 0.5 percent as USDCAD fell to 1.0197 from the North American session high of 1.0252.