Forexpros – The euro edged higher against the U.S. dollar on Thursday, after Spain saw borrowing costs rise sharply at an auction of government debt, but news that the euro zone’s bailout fund is to set aside funds to buy Spanish debt lent some support.
EUR/USD hit 1.2263 during European afternoon trade, the session low; the pair subsequently consolidated at 1.2303, edging up 0.15%.
The pair was likely to find support at 1.2174, the low of July 16 and near-term resistance at 1.2315, the high of July 7.
The euro touched the session low against the greenback earlier as Spain saw demand weaken and borrowing costs rise sharply at an auction of government bonds, fuelling fears that the country could lose access to international credit markets.
Spain’s Treasury auctioned EUR2.9 billion of two, five and seven-year government bonds, but the yield on the country’s five-year bonds climbed to 6.45% from 6.07% at a similar auction last month, while the yield on the seven year bond jumped to 6.79% from 4.89% in February.
Following the auction the yield on the country’s 10-year bonds was at 7.02%, breaching the critical 7% threshold, widely viewed as unsustainable in the long run.
But the euro found support following media reports that the European Financial Stability Facility is to set aside funds to purchase Spanish government bonds.
Investors were looking ahead to a German vote on approving the country’s part in bailout package for Spanish banks later in the day.
The greenback remained under pressure after Federal Reserve Chairman Ben Bernanke said Wednesday that the U.S. central bank was prepared to take further action to support the economic recovery if necessary, without indicating whether the Fed will embark on a third round of quantitative easing.
The euro was hovering close to a three-and-a-half year low against the pound, with EUR/GBP dipping 0.07% to 0.7840 and was weaker against the yen, with EUR/JPY down 0.15% to 96.63.
Later Thursday, the U.S. was to publish government data on initial jobless claims, as well as reports on existing home sales and manufacturing activity in Philadelphia.
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