The euro weakened against the yen and the dollar before European Union leaders meet in Brussels as they struggle to find a solution to the debt crisis.
The 17-nation currency reversed a gain of as much as 0.5 percent against the dollar, falling for the fourth straight day. Italy paid the most to sell 10-year bonds since December and yields also rose for a five-year note. Germany’s Ifo economic research institute said the debt crisis will weaken Germany’s economy this year. The euro is headed for its biggest quarterly declines versus the dollar and the yen since September.
“You can talk about unfinished business at the EU summit but things could take years to solve and the markets haven’t got that long,” said Chris Turner, head of foreign-exchange strategy at ING Groep NV in London. “The euro is going to take the strain and peripheral debt will remain under pressure.”
The euro depreciated 0.8 percent to 98.60 yen at 10:42 a.m. London time, and dropped 0.3 percent to $1.2432. The dollar weakened 0.5 percent against the yen to 79.32.
ING forecasts the euro will fall to $1.22 in the next month, Turner said.
Italy sold 5.42 billion euros of five- and 10-year bonds, versus a maximum 5.5 billion-euro target for the sale. The Treasury priced the 10-year debt to yield 6.19 percent, up from 6.03 percent at the previous auction on May 30. The five-year bond yielded 5.84 percent, compared with 5.66 percent last month.
Source: Bloomberg