The euro plummeted to a one-month low against the dollar on Wednesday and could well fall further on fears Italy, the eurozone's third-largest economy, may seek a bailout to avoid a debt default. Italian borrowing costs topped seven percent as investors dumped the country's bonds after clearing house LCH.Clearnet SA raised the margin call on the country's debt.
LCH had earlier taken similar action on Portugal and Ireland and both countries were forced to seek bailouts as a result. The euro consequently fell to $1.35522, its lowest since October 10 on trading platform EBS, and was last down 1.7 percent at $1.36011.
One-month implied volatility in euro/dollar, which gauges market expectations of the pair's currency moves in either direction jumped to 15.65 percent on Wednesday, from 14.45 percent the previous session. The dollar was slightly higher against the yen 77.740 yen but was up 1.4 percent at 0.90674 Swiss francs.