The impact of a better-than-expected short-term Italian debt sale is wearing off for the EURO Wednesday, with the European currency falling below $1.30 and markets beginning to question whether investors would greet Thursday’s 10-year debt sale with the same enthusiasm.
Earlier, the Italian Treasury auctioned EUR9 billion ($11.74 billion) worth of six-month treasury bills at a yield of 3.251%, less than half the amount it paid just a month ago. The result surprised investors still concerned that Europe’s policymakers are falling short in their efforts to contain its debt problems.
Nonetheless, yields on the country’s benchmark long-term bonds remain uncomfortably close to the 7% threshold economists consider unsustainable. Analysts say the yields serve as a potential harbinger for Thursday’s planned long-term debt auction, which could be a stiffer test for the euro zone’s third largest economy–and one of its most financially troubled.
The EUR sank as low as 1.2969 against the USD, down more than 0.70% on the session and near an 11-month low at 1.2945 it reached in mid-December. The EUR bought Y100.95, off about 0.85% and within view of its deepest trough in more than a decade at Y100.77.
As traders fled the common currency and other risk-sensitive assets in thin holiday markets, the dollar was boosted against nearly every major currency except a broadly-stronger yen. The GBP fell more than 1% against the dollar to trade near $1.5510, and the USD jumped by 0.55% from Tuesday’s close against the CHF, trading around 0.9391.
EasyForexNews Research Team