The euro dropped against all of its major counterparts except the dollar as Spain’s 10-year government bond yield climbed above 7 percent following today’s debt sale. That was the level that spurred Greece, Ireland and Portugal to seek bailouts.
Spain sold 2.98 billion euros of notes due from 2014 to 2019, in line with its maximum target. The Bank of Spain said demand for the two-year notes dropped to 1.9 times the amount sold from 4.26 last month. The yield increased to 5.204 percent from 4.335 percent at the previous sale on June 7.
“You’ve got Spanish 10-year yields at 7 percent and once again we’re at this psychological level,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “Once you get beyond there it tends to suggest investors really have taken a view that there has to be a bailout at some point. You’re going to see fairly consistent pressure on the euro for quite some time to come.”
The euro has declined 2.8 percent in the past month, the worst performance alongside the Swiss franc of the 10 developed- nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar strengthened 0.6 percent, and the yen appreciated 1.2 percent.
The Swedish krona appreciated for a third day against the dollar and euro, after yesterday climbing to the strongest since December 2000 versus the European currency.
“The most extreme positioning is in the Swedish krona right now,” Geoffrey Yu, a London-based currency strategist at UBS AG, said on Bloomberg Television’s “The Pulse” with Guy Johnson. “Sweden is very exposed to euro-zone growth. The last thing you want is growth collapsing for your biggest trading partner when you have a record high currency.”
The krona advanced 0.1 percent 8.5063 per euro, and rose 0.2 percent to 6.9218 versus the dollar.