Forexpros – The broadly weaker euro slid to a two-month low against the yen on Wednesday, as fears over euro zone sovereign ratings cuts persisted despite adequate investor demand at auctions of Italian and German government debt earlier.
EUR/JPY hit 101.22 during European afternoon trade, the pair’s lowest since October 4; the pair subsequently consolidated at 101.23, shedding 0.44%.
The pair was likely to find support at 100.74, the low of October 4 and resistance at 101.81, the session high.
Italy’s Treasury sold the full targeted amount of EUR3 billion of five-year government bonds, but bond yields rose to a euro-era high of 6.47%, up from 6.29% at a similar auction in November.
Following the auction, the yield on Italian 10-year bonds remained above the critical 7% threshold, close to record highs hit last month.
Meanwhile, Germany auctioned EUR4.18 billion of two-year bonds at euro-era low yields, reassuring investors after an auction of 10-year bonds last month met with extremely weak investor demand.
Sentiment on the single currency has been hard hit in recent days by the view that last week’s European Union summit did not result in concrete plans to tackle the debt crisis in the region.
On Tuesday, German Chancellor Angela Merkel reiterated her opposition to increasing the EUR500 billion lending limit for the permanent euro zone bailout fund, the European Stability Mechanism, which should come into effect from the middle of next year.
The euro was also down against the U.S. dollar, with EUR/USD shedding 0.50% to hit 1.2970.
Also Wednesday, official data showed that industrial production in the euro zone declined unexpectedly in October, falling for the second consecutive month.
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