Forexpros – The euro tumbled to a two-week low against the yen on Wednesday, after Italian bond yields climbed above 7%, a level which is widely perceived as unsustainable, bolstering demand for safe haven assets.
EUR/JPY hit 105.57 during European afternoon trade, the pair’s lowest since October 26; the pair subsequently consolidated at 105.83, tumbling 1.54%.
The pair was likely to find support at 104.74, the low of October 26 and resistance at 107.58, the days high.
The euro was sold off as the yield on Italian 10-year and two-year government bonds climbed above the 7% level that prompted Greece, Ireland, and Portugal to seek international bailouts after a Paris based clearing house hiked the margin call on Italian bonds.
The move came after Italian Prime Minister Silvio Berlusconi announced late Tuesday that he would step down after parliament approves next year’s budget, but uncertainty remained over whether Italy’s new government will be able to shore up growth and implement austerity measures.
Meanwhile, officials in Greece were scrambling to name a new prime minister, as efforts continued to avert an imminent default by implementing a new bailout program.
The euro was also sharply lower against the U.S. dollar, with EUR/USD falling 1.56% to hit 1.3614.
Also Wednesday, a spokesman for German Chancellor Angela Merkel said Germany was concerned about recent developments in financial markets and is watching developments in Italy with “great interest.”
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