Even as Greek worries take a backstage, investor concerns over Spain’s banking system are keeping the Euro close to a 2-year low versus the U.S. Dollar, as yields at the most recent Spanish debt auction rose to near 6.5% for 10-year benchmark debt, edging closer to the 7.0% threshold which analysts consider unsustainable over the long term. That is also the point at which Ireland, Portugal and Greece were compelled to request a bailout from the E.U./IMF. Notably, the spread between Spanish and German 10-year debt has now risen to 515 basis points, a margin not seen since the Euro’s inception, which is also raising fears that Spain, the 4th largest economy in the Eurozone, will also succumb to the debt crisis.
As reported at 12:42 p.m. (JST) in Tokyo, the EUR/USD was trading at $1.2526, close to the 2-year trough of $1.2495 struck last week; the nearest support is at $1.25. Against the Japanese Yen, the Euro traded at 99.68 Yen, just off the 4-month trough struck last week when the EUR/JPY pair hit 99.37 Yen.
Markets are also wary ahead of an Irish referendum on the E.U. fiscal treaty; while analysts expect that voters will grudgingly agree to the treaty, there is still some concern that a vote against the referendum could undermine the E.U.’s efforts.