Forexpros - The U.S. dollar was mixed against its major counterparts on Tuesday, as broad concerns over the ongoing sovereign debt crisis in the euro zone dampened investor demand for higher-yielding assets. During European afternoon trade, the dollar was up against the euro, with EUR/USD shedding 0.34% to hit 1.2461. The euro gave up small early gains against the greenback after Spain saw short-term borrowing costs double at an auction of government debt. Spain’s Treasury auctioned slightly more that the targeted amount of EUR 3 billion, selling EUR1.6 billion worth of three-month government bonds at an average yield of 2.36%, up sharply from 0.84% at a similar auction last month. Spain also sold EUR1.48 billion of six-month debt at an average yield of 3.23%, up from 1.73% in May. The spike in borrowing costs came after rating’s agency Moody’s said that it had downgraded 28 Spanish banks on Monday, citing concerns over Madrid’s ability to support its banking sector, after Spain’s government formally requested aid of up to EUR100 billion for its banks. Following the auction, the yield on Spanish 10-year bonds rose to 6.71%, nearing the critical 7% threshold, which is widely viewed as unsustainable in the long term. Meanwhile, Italy’s Treasury sold EUR2.99 billion worth of two-year bonds at an average yield of 4.71%, the highest since December. Sentiment on the euro also remained fragile amid doubts over whether an upcoming European Union summit will result in fresh measures to tackle the region’s debt crisis. The greenback was slightly lower against the pound, with GBP/USD adding 0.12% to hit 1.5594. Earlier in the day, Bank of England Governor Mervyn King said an interest rate cut would be less effective in stimulating the U.K. economy than more quantitative easing. In testimony to Parliament's Treasury Committee, King said the outlook for the U.K. economy had deteriorated in recent weeks as a result of the ongoing debt crisis in the euro zone. The comments came after official data showed that public sector net borrowing in the U.K. rose to GBP17.9 billion in May, up from GBP15.2 billion in the same month last year. Elsewhere, the greenback was lower against the yen, but pushed higher against the Swiss franc, with USD/JPY losing 0.50% to hit 79.26 and USD/CHF rising 0.36% to hit 0.9638. The greenback was lower against its Canadian, Australian and New Zealand counterparts, with USD/CAD dipping 0.07% to hit 1.0284, AUD/USD advancing 0.21% to hit 1.0030 and NZD/USD climbing 0.36% to hit 0.7901. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.12%, to trade at 82.74. Later Tuesday, finance ministers from Germany, France, Italy and Spain were to hold talks ahead of the EU summit on Thursday and Friday. The U.S. was set to release industry data on house price inflation, as well as a report on consumer confidence.

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