Forexpros — The euro extended losses against the U.S. dollar on Monday, falling to a fresh three-day low after Spanish bond yields surged to a euro-lifetime high, exacerbating fears over sovereign debt contagion in the euro zone.
EUR/USD hit 1.4013 during European morning trade, the pair’s lowest since July 13; the pair subsequently consolidated at 1.4043, dropping 0.79%.
The pair was likely to find support at 1.3950, the low of July 13 and resistance at 1.4198, Friday’s high.
Spanish government bond yields came under pressure on Monday, climbing to a euro-lifetime high of 6.31%, approaching the 7% mark that prompted peripheral euro zone nations, Greece, Portugal and Ireland to seek bailouts.
Yields on Italian bonds climbed to 6%, while yields on two-year Greek debt soared to a euro-era record of 34.37%.
Euro zone finance ministers were to meet Thursday to focus on “the financial stability of the euro area as a whole and the future financing of the Greek program,” according to the president of the European Council, Herman Van Rompuy.
Meanwhile, European Central Bank President Jean-Claude Trichet reiterated his opposition to any restructuring of Greek debt and said that the ECB would not accept as collateral bonds from a nation that defaults.
In an interview with Financial Times Deutschland, Trichet said, “If a country defaults, we can no longer accept as normal eligible collateral defaulted bonds issued by the government of that country because in the eyes of the Governing Council, this would impair our ability to be an anchor of confidence and stability.”
The euro was also down against the pound, with EUR/GBP slumping 0.41% to hit 0.8737.
Later in the day, the U.S. was to publish a government report on the balance of domestic and foreign investments.
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