MW:Dollar, yen rally on raging Greece, Spain fears
Euro drops to lowest level against the yen in this millennium
By William L. Watts and V. Phani Kumar, MarketWatch
FRANKFURT (MarketWatch)—The U.S. dollar rallied versus most major currencies, other than the Japanese yen, as Spanish borrowing costs soared into crisis territory and talk of a cutoff to aid for Greece put the euro-zone debt crisis back on the front burner.
The euro EURUSD -.00% traded at $1.2118, down from $1.2161 in North America late Friday.
The currency dropped as low as $1.2081, dropping below the $1.21 level for the first time since June 2010, according to FactSet data.
Against the Japanese currency, the euro EURJPY -0.30% fetched ¥94.64, after falling as low as ¥94.24, a level that hadn’t been seen in this millennium. Late Friday, the European currency bought ¥96.42.
“Risk-off is certainly the dominant theme this morning and we see little on the horizon this week to change the tide. In fact, despite a [light data schedule] today, event risk is rife this week and there is much that could boost the flow into perceived-safe-haven assets,” said Christian Lawrence, currency strategist at Rabobank International.
The shared currency’s losses, which follow Friday’s weak performance, came in the wake of a news report that the International Monetary Fund was set to stop aid for Greece, a decision that could potentially push the debt-stricken European nation into bankruptcy. IMF Greek aid suspension
At the same time, fears about Spain raged on, amid reports that the Valencia and Murcia regions could ask for Madrid’s assistance. Read more about aid requests from Valencia and Murcia.
“There has been little in the way of positive press since Friday, and as such, markets have started the week as they finished the last—with a decided air of risk aversion,” said Sue Trinh, senior currency strategist at RBC Capital Markets.
Spanish bond yields soared, with the 10-year yield ES:10YR_ESP +2.77% jumping by around a quarter of a percentage point to 7.46%, while the two-year yield soared nearly 0.90 percentage point to 6.51%. Yields rise as bond prices fall.
European stocks tumbled and U.S. stock index futures pointed to a sharply lower start for Wall Street, with futures on the Dow Jones Industrial Average DJU2 -1.19% down 135 points at 12,638.
The ICE dollar index DXY +0.22% , which measures the greenback against a basket of six other major currencies, climbed to 83.756 from 83.457 late in North American trade Friday.
The WSJ dollar index XX:BUXX +0.27% , a new benchmark tracking the U.S. unit’s moves against some of the world’s most heavily traded currencies, rose to 72.51 from 72.33 on Friday.
The British pound GBPUSD -0.58% fell to $1.5538 from $1.5619, and the Australian dollar AUDUSD -0.74% lost ground to trade at $1.0292, down from $1.0382.
Against the Japanese currency, however, the dollar USDJPY -0.32% fell to ÂĄ78.15 from ÂĄ78.47. The yen, like the dollar, is widely considered a safe-haven where investors seek refuge during periods of financial stress.
The yen held its gains against the dollar and the euro, as well as many other currencies, despite a warning from Japan’s Finance Minister Jun Azumi that Tokyo would take “decisive steps against speculative movement of excessive volatility.” Japan finance minister’s comments
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
