Euro falls versus dollar

The euro dropped against the dollar on Wednesday, dragged down by heavy falls in Spanish stocks and losses against sterling, and it looked set to stay under pressure from Spain's budget troubles and the potential repercussions for the currency zone.
Some strategists said comments from European Central Bank policymaker Jens Weidmann that countries should not expect the central bank to tackle rising debt yields by buying government bonds prompted the weakness in stocks.
Data showing Spanish banks' bad loans rose to their highest level since 1994 also spooked investors. The euro dropped 0.4 percent against the dollar to $1.3070, within sight of a two-month low of $1.2994 hit briefly last week. It also came under heavy pressure against sterling after less dovish than expected Bank of England minutes.
Market players said the euro could post further losses ahead of a Spanish bond auction on Thursday, and any evidence of poor demand and high yields at the auction would aggravate concerns about Spain's fragile fiscal position.
"The Spanish equity market has been hit drastically today, we also had Mr Weidmann's comments coming out. This negative impact on capital markets in Europe is the driver for euro weakness," said Hans Redeker, head of global FX strategy at Morgan Stanley.
The euro has traded roughly between $1.30 and $1.35 since January, and has struggled to rise above $1.32 since early April. CitiFX Wire said in a note that its traders were looking to buy the range-bound currency on dips.
Sterling rallied against the euro and dollar after minutes showed the Bank of England was concerned about high inflation persisting into the medium term and one policymaker dropped his long-standing call for more stimulus.
The euro fell 0.8 percent against the pound to 81.78 pence, its lowest level in 19 months and below reported options barriers at 82 pence.
Meanwhile, the Swedish crown rose to a two-week high against the euro of 8.8350 crowns after the Riksbank left rates on hold and said it expected to keep them there for at least a year.
The dollar rose 0.6 percent against the yen to 81.34 yen. The euro traded up 0.2 percent on the day at 106.35 yen, holding above Monday's low of 104.62 yen.