Forexpros – The euro dipped below 1.30 against the U.S. dollar on Wednesday, as concerns over threat of sovereign downgrades and elevated peripheral bond yields weighed on the single currency.
EUR/USD hit 1.2991 during European early afternoon trade, the pair’s lowest since January 12; the pair subsequently consolidated at 1.2992, shedding 0.33%.
The pair was likely to find support at 1.2872, the low of January 10 and resistance at 1.3064, the session high.
Italy’s Treasury sold the full targeted amount of EUR3 billion of five-year government bonds, at an average yield of 6.47%, a euro era high, after paying 6.29% at a similar auction in November.
Following the auction, the yield on Italian 10-year bonds was above the critical 7% threshold, re-approaching the euro-era highs hit last month.
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.
Demand for the greenback remained supported after the Federal Reserve warned that market turbulence stemming from the crisis in the euro zone posed a threat to the U.S. economy but stopped short of indicating fresh stimulus measures to shore up growth.
The euro was also lower against the pound, with EUR/GBP shedding 0.45% to hit 0.8383.
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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