The euro was under pressure today, slipping against the yen and holding near its latest record low against the safe-haven Swiss franc as funding concerns in the euro zone made investors nervous.
The euro slid to a three-week low on the yen, which gained broadly, and inched lower on the dollar after losing 0.8 per cent yesterday, with small stop-loss sell orders expected just below current price action, in the $1.2260/30 area.
The Swiss franc has strengthened steeply on the euro and the dollar over the past month, and the single European currency hit its lowest ever level yesterday at 1.3329 francs after barriers and stop loss sell orders at 1.3400 were taken out.
The euro has lost 4 per cent since mid-June when the Swiss central bank backed off a pledge to fight excessive franc appreciation, shedding about 10 per cent this year, and a dealer at a Swiss bank said today there was no sign of the central bank so far.
Instead funding pressures in the euro zone on concerns ahead of bank repayments to the European Central Bank this week as well as debt auctions were keeping investors wary.
"Renewed debt stress stories...have weighed a bit on the euro and led to renewed safe-haven parking in the yen and Swiss franc," the dealer said.
"Investors' sentiment towards peripheral Europe remains cautious and fragile to say the least."
The euro softened 0.1 per cent to 1.3336 francs, after dropping 1.5 per cent yesterday, while the dollar eased to 1.0875 francs, above yesterday’s two-month low of 1.0817.
The yen lurched higher in the Asian session with some talk of Japanese exporters repatriating earnings, selling euros and dollars for yen. Selling was also seen on the Australian dollar, which fell 0.8 per cent on the day to 77.27 yen.
The euro dropped 0.5 per cent to its weakest in three weeks at 109.16 yen, while the dollar hit a six-week low at 89.02 yen.
The euro was also hovering near this week's 18-month low on sterling at 81.215 pence, as funding pressures in the euro zone re-emerged with interbank lending rates there hitting their highest in almost seven months yesterday.
Banks must repay €442 billion to the ECB on Thursday, leaving a potential liquidity shortfall in the financial system of over €100 billion.
Financial markets will closely watch debt auctions by France and Spain later this week after tepid demand for Italy's sale of €7 billion of government bonds yesterday kept worries about euro zone debt troubles alive.
The premium investors demand to hold 10-year Italian, French and Spanish government bonds, rather than euro zone benchmark German Bunds, all widened.
The pound held firm against the dollar after hitting its highest in nearly two months at $1.5130 yesterday, when Bank of England policymaker Andrew Sentance said drastic tax hikes and spending cuts in Britain would not delay the start of a tightening cycle.
Reuters