Forexpros – The euro extended losses against the U.S. dollar on Wednesday, falling to a fresh 22-month low as fears that rising Spanish bond yields and the growing cost of bank rescues would force Madrid to seek an international bailout.
EUR/USD hit 1.2408 during U.S. morning trade, the pair’s lowest since July 1 2010; the pair subsequently consolidated at 1.2410, tumbling 0.74%.
The pair was likely to find support at 1.2350 and resistance at 1.2504, the session high.
The yield on Spanish 10-year bonds climbed to 6.7% on Wednesday, approaching the critical 7% threshold that preceded bailouts in Greece, Ireland and Portugal.
Elsewhere, Italy auctioned EUR5.73 billion of 5-and10-year bonds in debt sale which met with lackluster investor demand and saw borrowing costs rise sharply, fuelling concerns that the debt crisis in the euro zone is deepening.
The euro briefly found support earlier after the European Union Commission said that stricken euro zone banks could be recapitalized directly through the region’s permanent bailout fund.
In its report on euro zone economic strategy, the Commission also supported the idea of “joint debt issuance” or euro bonds, an idea which has met strong opposition from Germany, and said the euro zone should move towards the idea of a full banking union.
Meanwhile, concerns over the outcome of Greek elections mounted after an opinion poll showed anti-austerity party Syriza in the lead ahead of the June 17 vote, fuelling concerns that the country will reject the terms of its bailout agreement and be forced out of the euro area.
The euro was slightly lower against the pound, with EUR/GBP slipping 0.11% to hit 0.7982 and dropped to a four-month low against the yen, with EUR/JPY tumbling 1.39% to hit 97.99.
In the U.S., the National Association of Realtors said its pending home sales index tumbled by 5.5% in April, confounding expectations for a modest 0.1% decline.
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