Forexpros – The euro tumbled against the U.S. dollar on Wednesday, falling more than 1% after the yield on Italian 10-year government bonds rose above 7%, a level widely perceived as unsustainable, exacerbating concerns over the country’s financial crisis.
EUR/USD hit 1.3630 during European late morning trade, the pair’s lowest since November 1; the pair subsequently consolidated at 1.3629, tumbling 1.47%.
The pair was likely to find support at 1.3564, the low of November 1 and resistance at 1.3827, the high of October 11.
The euro weakened broadly after a Paris based clearing house hiked the margin call on Italian bonds, fuelling concerns over the country’s fiscal crisis.
The yield on Italian 10-year bonds and two-year bonds climbed slightly above 7%, amid uncertainty over whether Italy’s new government will be able to shore up growth and implement austerity measures, after Prime Minister Silvio Berlusconi announced that he would step down after parliament approves next year’s budget.
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 yen, with EUR/JPY falling 1.45% to hit 105.94.
Elsewhere Wednesday, government data showed that China’s annualized rate of consumer price inflation came in broadly in line with expectations in October, slowing to 5.5%, after a 6.1% increase the previous month, easing fears over monetary tightening by Beijing.
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