Euro stumbles in London

The euro fell to the day's low on Friday after an Italian debt sale failed to match a stellar Spanish auction the previous day, in a reminder that Europe's debt crisis is unresolved and the currency's downtrend is entrenched. Italy sold 4.75 billion euros of government bonds, but demand for its three-year benchmark paper was weaker than expected. The auction came a day after Spain sold twice the planned amount of bonds, supported by domestic banks awash with European Central Bank liquidity.
The euro fell from around $1.2840 versus the dollar to the day's low of $1.2766 on trading platform EBS to trade down around 0.3 percent for the day. It had earlier risen to a one-week high of $1.2879 on short-covering. "After the Spanish auction people got a bit too excited and bulled up for Italy today. It was OK, but not anything like as dramatic as Spain," said Adrian Schmidt, currency strategist at Lloyds Banking Group.
The euro was down 0.3 percent at 98.11 yen, holding above this week's 11-year low of 97.28. Against the higher-yielding Australian dollar, it slipped back to A$1.2365, not far from a record low of A$1.2291 struck on Thursday. Traders said stop-loss orders below $1.2750 may accelerate any downmove in the euro, which remained within sight of Wednesday's 16-month low of $1.2661.
"We're still in the downtrend and many people are short from well above $1.30 so they won't be cutting their positions yet," said Schmidt. Technical analysts said the outlook for the euro would remain negative while below the 21-day moving average around $1.2931. A media report that Greece may soon reach a deal with private creditors for a voluntary debt exchange initially helped the euro, though uncertainty over the long-term future of Greece's finances kept the rally in check.
Concerns are rising that time is running short to clinch a deal on a voluntary debt exchange, while euro zone sources said Athens may force reluctant investors to accept losses. The dollar was steady at 76.74 yen, while it rose slightly to 80.932 versus a currency basket, not far from a 16-month high of 81.493 hit Wednesday after a run of robust US economic data boosted hopes for its economy and tempered expectations for more monetary easing.