Euro Falls Broadly on Spain Worries

By: Barbara Zigah

The Euro hit a 1-month trough against the U.S. Dollar and 1½-year low versus the British Pound Sterling as rising Spanish bond yields brought new worries of Eurozone debt contagion. As reported at 12:18 p.m. (JST) in Tokyo, the Euro fell to $1.30089, just off the March 15th low and, according to some traders, close to an options trigger near $1.30. Rising Spanish yields has compelled Spain’s banks to turn away from the wholesale credit markets and borrow from the European Central Bank instead; records indicate that lending in March surged to €316.3 billion, nearly double that of February. A spokesperson from the ECB said he believed that the central bank would likely still support the European bond market if needed, but another LTRO was a less likely probability.

Against the safe haven Japanese Yen, the Euro was trading at 105.25 Yen, slipping to an 8-week, and the GBP/EUR pair slipped to 0.8221 Pounds, the lowest level in nearly 18 months. Analysts say that the Euro’s broad declines could also pressure the EUR/CHF pair, which has been pegged at 1.20 Francs since last September when the Swiss National Bank set the peg. Some analysts believe that markets could try to test the peg and with it the Swiss government’s resolve.