Euro pares losses in Asia

The euro trimmed its losses after hitting five-week lows versus both the dollar and the yen on Thursday as bond market turmoil spread across Europe, but market players were still bracing for further weakness in coming weeks. Investors were also nervously watching to see how German financial markets will react after rating agency Moody's Investors Service cut ratings of 12 German public-sector banks, believing they are likely to receive less federal government support if needed.
The euro dipped to as low as $1.3421 on trading platform EBS at one point, its lowest since October 10. It later trimmed its losses to change hands at $1.3505, up 0.3 percent from late US trade on Wednesday. Support lies at around $1.3405, the 76.4 percent retracement of the October rally. The bottom of the weekly Ichimoku cloud also offers support near that level, coming in at $1.3408.
While the euro will remain sensitive to headlines and could see some short-covering rallies, it will probably decline further in coming weeks and months, said Chris Gothard, head of FX for Brown Brothers Harriman in Hong Kong. Against the yen, the euro touched a five-week low of 103.40 yen at one point, but later pared its losses to stand at 103.97 yen, up 0.2 percent on the day.
Later on Thursday, the euro is likely to take its cues from auctions of up to 11 billion euros of Spanish and French bonds. Spain's sale of new 10-year debt comes as the country's finances are under renewed scrutiny just days before a general election and Madrid is expected to face its highest borrowing cost since the euro's inception in 1999.
One factor that may temper the euro's decline is wariness among some investors about taking bearish bets against the currency in the wake of its recent swings, said Adarsh Sinha, Asia-Pacific G10 FX strategist at Bank of America Merrill Lynch in Hong Kong.
The Australian dollar hit a five-week low of $1.0021 at one point, but later pared its losses to stand at $1.0104, up 0.2 percent on the day. "The AUD/USD remains under downward pressure and could try to push under parity to a support pivot point of $0.9986 in the near term," said Besa Deda, chief economist at St. George Bank. Among the G3 currencies, dollar/yen remained a sea of calm as the danger of more intervention by Japan kept markets wary. Dollar dipped 0.1 percent to 76.98 yen, having settled into a range roughly between 76.80 yen to 77.50 yen this week.