CORRECTED-FOREX-Euro struggles on mounting Spanish and Greece concerns

by on July 23, 2012 5:36 pm BST

Mon Jul 23, 2012 1:36pm EDT

(Correct 3rd paragraph to show Murcia has not decided on aid)

* Euro hits 2-year low vs dollar, near 12-year low vs yen

* Fall broad-based; hits record low vs Aussie

* Worries grow about stemming Spain and Greece fiscal

NEW YORK, July 23 (Reuters) – The euro slid to a two-year
low against the dollar and a near 12-year trough against the yen
on M onday on concerns Spain will have to seek a full sovereign

Spanish bonds yields soared to their highest levels since
the euro was created, despite euro zone finance ministers
approving on F riday terms for a loan of up to 100 billion euros
for Madrid to recapitalise its banks. Analysts said this was the
prime driver of the euro’s fall.

Murcia could become the second Spanish region to request
financial assistance from the government, after Valencia, with
media reports suggesting six regions could seek aid.

“The week is off to a challenging start as rising fears over
Europe push risk aversion higher,” said Camilla Sutton, chief
currency strategist at Scotia bank in Toronto. “Most of the
focus is on Spain, with rising concern it too will need to
access financial aid.”

“With no EU summit on the horizon and European vacation
season upon us, capital is moving rapidly from the more exposed
regions to the stronger sovereigns,” Sutton said.

The euro fell as low as $1.2067, its weakest since
June 2010 and creeping ever closer to the 2010 low of $1.1875,
using Thomson Reuters data. The euro was last at $1.2074, down
0.7 percent from Friday’s close.

After closing at $1.2156 in New York on Friday, it “gapped”
lower to open at $1.2120 in Asia on Monday morning, signifying
the market perceived the value of the euro had dropped over the
weekend in response to events in the euro zone.

Against the yen it dropped on the day to 94.22
yen, a level not seen since late 2000.

The euro tumbled not just against safe havens like the
dollar and the yen but also against currencies that usually fall
in times of heightened risk aversion in financial markets.

At the session lows of the day it hit a record low versus
the Australian dollar, a more than 3-1/2 year low
against sterling and a 9-1/2 year low versus the
Norwegian crown.


The prognosis for Greece also appeared to darken, only
adding to the reasons for investors to sell the euro. German
magazine Der Spiegel reported on Sunday that the International
Monetary Fund may not take part in any additional financing for
Greece, highlighting growing frustration with Athens.

Speaking two days before a team of international lenders
arrive in Athens to push for further spending cuts in return for
more rescue payments, Prime Minister Antonis Samaras said Greece
was in a “Great Depression” similar to the United States in the

Looking ahead, analysts said any weakness in euro zone
provisional purchasing managers’ surveys on manufacturing and
services sector activity due on T uesday would only add to the
gloom and intensify selling pressure on the euro.

With risk aversion back on the rise, the safe-haven U.S.
dollar and yen found good support. The dollar also hit a
19-month high against the Swiss franc.

The yen was the biggest gainer. The dollar fell to a seven
week low against the yen of 77.95 yen. The dollar last
traded down 0.3 percent at 78.19 yen.

Japan’s Vice Finance Minister for international affairs was
reported as saying the country will not exclude any options when
responding to excessive currency moves, although market players
said the authorities were unlikely to consider intervening while
dollar held above 76 yen.

The Australian currency fell sharply against the dollar
and was last down 0.9 percent at $1.0278, with traders
saying worries about slower Chinese growth only added to
investor risk aversion.

(Reporting By Nick Olivari)