Euro sinks in New York

The euro tumbled to its lowest level against the dollar in more than a year and hit an 11-year trough versus the yen on Thursday as investors worried about the ability of eurozone economies and banks to raise funding. The dollar was also buoyed by data showing US private sector hiring surged in December and that claims for unemployment benefits fell further.
The reports highlighted a growing disparity between the US economy and Europe, which many analysts say is either in or near a recession. The data led investors to favour the dollar before Friday's report from the US Labour Department on December non-farm payrolls, a frequent mover of financial markets.
The euro's reaction to a French debt auction was a repeat of selling seen on Wednesday, when investors dumped the currency despite reasonable demand at an auction of German bonds. Analysts said next week's Italian and Spanish government bond sales, seen as those countries' first major refinancing tests of the year, will likely keep the market on edge and the euro under pressure.
"There are several reasons why Spain may ultimately be more worrisome than Italy," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. A heavily discounted rights issue from Unicredit, Italy's largest bank, had underscored funding problems in the eurozone's third-largest economy and also made investors reluctant to buy the euro.
The euro fell as low as $1.2775, its lowest since September 2010, and was last at $1.2782, down 1.2 percent. The dollar rose against a currency basket to its highest level in a year. The dollar gained 0.6 percent against the yen to 77.18 yen after trading at a near one-week high of 77.23 yen.
The latest data from the European Central Bank suggested banks were hoarding cash rather than lending to each other despite the ECB's providing almost half a trillion euros of ultra-cheap three-year loans last month. Broad weakness in the euro also saw it fall to its lowest level against the yen since 2000, hitting 98.35 yen, according to Reuters data. It also weakened against the Australian and Canadian dollars.
DailyFX reported its client trading shows euro dollar long positions are 11.1 percent higher than Wednesday and 15.5 percent stronger since last week. Short positions are 8.9 percent lower than Wednesday and 17.4 percent weaker since last week. The ratio of long to short positions in the euro/dollar stands at 1.53 as nearly 60 percent of traders are long.
The firm's Speculative Sentiment Index is a contrarian indicator and signals more euro/dollar losses, DailyFX said. The euro traded at 1.2178 Swiss francs, little changed on the day, while the dollar was up 1.2 percent at 0.9526 franc, its highest since mid December.