Forexpros – The U.S. dollar was trading close to a two-year high against the euro and remained broadly higher against the other major currencies on Monday, as concerns over the debt crisis in the euro zone deepened, bolstering safe haven demand.
During European afternoon trade, the dollar was up against the euro, with EUR/USD down 0.55% to 1.2091.
The yield on Spanish 10-year bonds was at 7.43%, above the 7% threshold widely considered unsustainable if a country is to remain solvent, amid growing fears that Spain will need a full 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.
Earlier Monday, Spain’s Economy Minister Luis de Guindos denied that Madrid will need a full-scale bailout.
Meanwhile, fears over a Greek exit from the euro zone resurfaced, amid worries over whether Athens can meet the conditions of its international bailout ahead of a meeting with the Troika on Tuesday.
The greenback was higher against the pound, with GBP/USD losing 0.69% to hit 1.5512 and climbed to a 19-month high against the Swiss franc, with USD/CHF adding 0.53% to trade at 0.9932.
In contrast, the greenback was weaker against the safe-haven yen, with USD/JPY down 0.33% to 78.22.
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 jumping 0.71% to 1.0197, AUD/USD tumbling 1.13% to 1.0259 and NZD/USD down 1.21% to 0.7898.
The Australian dollar was little changed 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 0.51% to 84.03.
Neither the euro zone nor the U.S were to release any significant economic indicators on Monday, so markets looked set to remain focused on developments in Europe.
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