Euro Extends Slide On Rising Spanish Bond Yields

Euro Extends Slide On Rising Spanish Bond Yields


The euro has been extending its slide against most major currencies in European deals on Friday after reports said that the Spanish 10-year benchmark yields climbed back above the critical threshold of 7 percent, despite both German and Finnish parliaments approval of the aid funds directed to the Spanish banking system.
Finland's parliament approved a Eurozone-sponsored rescue deal for Spanish banks and the collateral deal struck by the country with Spain, during a confidence vote today. While 109 lawmakers voted in favor, 73 opposed the motion and 17 were absent. The opposition parties raised strong criticism against the bailout package.
Meanwhile, the German parliament has also approved a EUR100 billion ($122 billion) financial rescue package to shore up Spain's distressed banks. The Bundestag, the lower house of parliament, which was recalled from its summer break for an emergency session on Thursday, passed with 473 votes a legislation on the euro zone's first bailout package for debt-laden Spain, reports said.
Eurozone finance ministers are expected to approve an agreement on the proposed financial assistance to Spain to recapitalize its troubled banks in a meeting today. The group will hold a conference call at Brussels to finalize the details of a EUR 100 billion bailout deal for Spanish banks struck last month.
In economic news, producer price inflation in Germany eased in June to its lowest level since May 2010, the Federal Statistical Office said today.
The producer price index rose 1.6 percent year-on-year in June from 2.1 percent in May. This was the lowest rate of inflation since May 2010, when it stood at 0.9 percent.
Economists expected an increase of 1.8 percent in the producer price index.
The euro dipped to a fresh 3-1/2-year low of 0.7792 against the pound, compared to yesterday's close of 0.7861. The next downside target level for the euro is seen at 0.75.
The U.K. public sector net borrowing, excluding the temporary effects of financial interventions, rose to GBP 14.4 billion from GBP 13.9 billion during the same period of last year, the Office for National Statistics reported today.
Public sector net borrowing totaled GBP 125.7 billion for 2011/12, which was GBP 0.3 billion lower than the Office for Budget Responsibility estimated net borrowing for 2011/12 of GBP 126 billion.
Against the yen, the European single currency that closed Thursday's deals at 96.53 is now trading at a 7-week low of 96.03. If the euro slides further, it may target 95.6 level.
The euro declined to a 2-day low of 1.2228 against the U.S. dollar with 1.22 seen as the next downside target level. At yesterday's close, the pair was worth 1.2282.
Against the NZ dollar, the euro that showed choppy trading in the Asian session declined in European deals. The euro dropped to as low as 1.5259 from Thursday's close of 1.5292. If the euro falls further, it will break yesterday's record low of 1.5235.
The euro that pared its early Asian session's gains against the Australian dollar in later deals was declining during early European deals. The euro that finished yesterday's trading at 1.1782 against the aussie fell to 1.1756. The euro is likely to break yesterday's record low of 1.1748 on the downside.
The euro edged down to 1.2336 against the Canadian dollar from Thursday's New York session close of 1.2376. On the downside, the euro may break yesterday's record low of 1.2327.


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