Forexpros – The euro pared gains against the U.S. dollar on Thursday, pulling back from a four-day high after an Italian bond auction saw yields rise to a three-year high, adding to concerns over the region’s ongoing debt crisis.
EUR/USD pulled back from 1.4281, the pair’s highest since July 8 to hit 1.4182 during European afternoon trade, still up 0.14% on the day.
The pair was likely to find support at 1.3950, Wednesday’s low and resistance at 1.4368, the high of July 8.
Earlier in the day, Italy auctioned EUR1.25 billion of five-year bonds at an average yield of 4.93%, the highest since June 2008 and up significantly from 3.9% in June.
The country also sold EUR1.71 billion of 15-year bonds at a record-high yield of 5.9%, compared to 5.34% from a previous auction.
It was the first sale of longer-term debt since Italy’s 10-year yield soared to a euro-lifetime high of 6.02% on July 12.
Italy is the euro zone’s third largest economy and has the highest sovereign debt ratio relative to its economy in the single currency bloc after Greece.
Meanwhile, Greece’s credit rating was cut three levels by ratings agency Fitch on Wednesday to CCC, its lowest grade for any country in the world, saying that a default was a “real possibility.”
But the greenback remained under selling pressure after ratings agency Moody’s said late Wednesday that it placed the U.S. government’s Aaa bond rating on review for possible downgrade for the first time since 1995, citing “a small but rising risk” of a short-lived default.
The euro also pared gains against the pound, retreating from a daily high of 0.8830, to hit 0.8798, easing up 0.04%.
Later in the day, the U.S. was to release a string of economic data, including a report on retail sales, producer price inflation, as well as weekly government data on initial jobless claims.
Also Thursday, Fed Chair Ben Bernanke was to deliver the second part of his testimony on monetary policy in Washington.
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