The euro hit a 10-year low against the yen on Thursday, pressured by selling from Japanese retail investors and exporters, with moves amplified in poor year-end liquidity. Stop-loss selling in the euro versus the yen added to the pressure against the single currency, which also dipped against the dollar and hit its lowest level in nearly a year of $1.2887.
The euro extended its losses after sliding the previous day in thin year-end trading, and market players said the single currency is likely to stay vulnerable. "Nobody sees anything on the horizon that could be mildly positive for the euro," said Rob Ryan, FX strategist for BNP Paribas in Singapore. The euro fell to as low as 100.35 yen on trading platform EBS earlier on Thursday, its lowest level since June 2001.
After trimming some of its losses, the euro was changing hands at 100.53 yen, down 0.3 percent from late US trade on Wednesday. In addition to Japanese exporters, traders said Japanese retail margin traders were spotted selling the euro against the yen. There was market talk of an option barrier at 100.00 yen, suggesting that the euro could draw some support from buying by options players just above that level. But the euro's drop might gain additional momentum if that level is breached, with one trader saying there were large stop-loss euro offers at 100.00 yen.
The single currency fell 0.1 percent versus the dollar to $1.2929. The euro dipped to as low as $1.2887 earlier on Thursday. That was its lowest level since January 10, when the euro hit its 2011 low of $1.2860. Markets are now waiting to see the outcome of a sale of up to 8.5 billion euros of Italian bonds on Thursday. A renewed rise in Italian 10-year government bond yields over the past few weeks bodes ill for the single currency, an FX sales trader for a major Japanese bank in Tokyo said.
"Unless steps such as expanding the ECB's role are taken...it will be hard to stem this move lower (in the euro)," the trader said. A focal point among market players has been whether the ECB will play a greater role in stabilising debt markets by expanding its purchases of eurozone debt. The euro's latest drop helped lift the dollar to 80.729 versus a basket of currencies at one point, right near an 11-month high of 80.730 hit in mid-December. Against the yen, the greenback eased 0.3 percent to 77.75 yen.