Euro falls in London

The euro fell on Thursday as high borrowing costs at an Italian debt auction intensified concerns about the eurozone debt crisis spreading, though deadlocked US debt ceiling talks limited losses versus the dollar. Italy sold 10-year bonds but only at the cost of yields soaring to their highest in 11 years, while yields in the secondary market jumped, increasing worries a second Greek bailout package agreed last week may not prevent contagion to larger eurozone economies.
The euro dropped to a one-week low of $1.4268 on EBS trading platform, with traders saying losses accelerated after stop-loss orders were triggered from $1.4320 down to $1.4280. It was last down 0.65 percent on the day at $1.4272. Traders said bids starting from $1.4250 may help limit losses.
"The market seemed to put the US debt ceiling on the back burner as attention turned to Greece again, while Italian bond yield spreads widening was the catalyst for the more aggressive sell-off from $1.4330/40," said Richard Wiltshire, chief FX broker at ETX Capital.
The Swiss franc also rose to a record high against the dollar of 0.7990 francs as investors unnerved by debt crises on both sides of the Atlantic scrambled for safe haven assets. The euro fell 0.5 percent to 1.1454 Swiss francs, bringing it closer to a record low of 1.1365 francs hit in mid-July.
"We are seeing a sell-off in Italian bonds post-auction which is putting pressure on the euro," said George Saravelos, G10 FX strategist at Deutsche Bank, who said euro/dollar was likely to pare losses because of concerns over the US debt ceiling impasse. The euro also fell sharply against the safe haven yen, falling 0.9 percent to 111.00 yen, while the dollar dropped 0.3 percent to a session low of 77.627 yen on EBS, near a four-month low of 77.57 yen hit on Wednesday.
That was not far from a record low of 76.25 yen struck in March, which triggered a co-ordinated intervention in the market to stem the yen's strength. Market players have been speculating that the Bank of Japan may intervene to curb yen strength but Yosano's comments suggested there would be no central bank action before August 2, opening the door to further yen gains.