Forexpros – The U.S. dollar remained broadly higher against the other major currencies on Monday, as investors sought out safety amid mounting concerns over the deepening debt crisis in the euro zone.
During U.S. morning trade, the dollar was trading close to a two-year high against the euro, with EUR/USD down 0.35% to 1.2112.
The yield on Spanish 10-year bonds was hovering close to 7.50%, above the 7% threshold widely considered unsustainable if a country is to remain solvent, amid growing fears that Spain will need a full-scale bailout after the state of Murcia followed Valencia in requesting financial aid from Madrid over the weekend.
The spike in borrowing costs came despite euro zone finance ministers approving a package of as much as EUR100 billion to bailout Spain’s banks on Friday.
Market sentiment found some support after the International Monetary Fund said it was to due start talks with Greece on Tuesday, aimed getting the country’s economic reform program back on track.
The announcement came after German media reports suggested that the IMF would no longer take part in providing financial aid for Greece, fuelling fears that the country would eventually exit the euro zone.
The greenback was higher against the pound and the Swiss franc, with GBP/USD dropping 0.70% to hit 1.5510 and USD/CHF adding 0.36% to trade at 0.9913.
In contrast, the greenback was weaker against the safe-haven yen, with USD/JPY slipping 0.15% to 78.36.
Earlier in the day, Japanese Finance Minister Jun Azumi reiterated that Tokyo was ready to take decisive steps against speculative moves or excessive volatility in the yen, amid concerns over the impact on the country’s largely export driven economy from the stronger currency.
But the greenback was sharply higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD rising 0.48% to 1.0176, AUD/USD tumbling 1.06% to 1.0267 and NZD/USD down 1.29% to 0.7892.
The Australian dollar was little changed earlier Monday, after official data showed that domestic producer price inflation rose 0.5% in June, outstripping expectations for a 0.3% increase, following a 0.3% drop in May.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.35% to 83.91.
The U.S was not to release any significant economic indicators on Monday, so markets looked set to remain focused on developments in the euro zone.
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