The euro weakened to a more than two-year low against thedollar, falling below $1.21, as concern mounted that Europeanleaders are failing to gain control of the region's debtcrisis.

The 17-nation currency dropped to less than its lifetime averageversus the dollar, and slid to an 11-year low against the yen.Japan's currency strengthened against all 16 of its majorcounterparts as investors sought safer assets. Six Spanish regionsmay ask for aid from the central government, El Pais reported,propelling the nation's 10-year bond yield to a euro-era high. TheSwiss franc weakened through 99 centimes per dollar for the firsttime since December 2010.

“I see euro parity against the dollar,” said Neil Jones, head ofEuropean hedge-fund sales at Mizuho Corporate Bank Ltd. in London.“Spanish yields surging to records indicate a lack of confidence infinding a solution to the crisis, which is weighing on thecurrency.”

The euro fell 0.3 percent to $1.2120 at 7:38 a.m. in New Yorkafter falling as much as 0.6 percent to $1.2082, the weakest sinceJune 2010 and below the average of $1.2087 since its inception in1999. The shared currency dropped 0.6 percent to 94.86 yen. Itearlier slid to 94.24 yen, the lowest since November 2000. The yenrose 0.3 percent to 78.26 per dollar.

Catalonia, Castilla-La-Mancha, Murcia, the Canary Islands, theBalearic Islands are among the Spanish regions that have admittedthey may ask for aid from the central government after Valenciasought a bailout last week, El Pais reported. The Catalan regionalgovernment is trying to negotiate a bridge loan with undisclosedfinancial entities, the newspaper said.

The yield on Spain's 10-year bond jumped to as much as 7.565percent, the highest since the euro was created, while the cost ofinsuring against default on the nation's sovereign debt also soaredto a record before it auctions bills tomorrow.

If Spanish yields climb toward 8 percent, “you'd get a scenariowhere the EU and troika basically need to bail out Spain, not justthe banking sector but the entire economy,” Craig Ferguson, acurrency hedge fund manager at Antipodean Capital Management inMelbourne, said in an interview with Bloomberg Television,referring to the European Union.

The euro has slumped 5.5 percent this year, the worstperformance among 10 developed-market currencies tracked byBloomberg Correlation-Weighted Indexes. The yen is little changed,and the dollar advanced 1.9 percent.

Greece Concern

The shared currency also dropped before the troika of Greece'sinternational creditors — the European Commission, the EuropeanCentral Bank and the International Monetary Fund — arrive in Athenstomorrow amid doubts the nation will meet its commitments andreluctance among euro-area states to put up more funds should itfail.

The IMF will stop paying rescue aid to Greece as it is alreadyclear the nation will not be able to fulfill its promise to cutdebt to 120 percent of annual economic growth in euro terms by2020, Der Spiegel magazine reported, citing unidentified EUofficials.

“The euro is never running out of catalysts to sell,” said KengoSuzuki, a foreign-exchange strategist in Tokyo at Mizuho SecuritiesCo., a unit of Japan's third-largest bank by market value. “The yenis expected to remain strong among the major currencies as theleast bad choice.”

U.S. Treasuries, German bunds and U.K. gilts all rose asinvestors sought safer assets. U.S. five-, 10- and 30-year yieldsdeclined to records, as did rates on U.K. two-, five- and 10-yeargilts, and two- and five-year German debt. The Stoxx Europe 600Index of shares slid 1.9 percent.

The Swiss franc weakened for a fourth day against the dollar,dropping as much as 0.6 percent 99.39 centimes, the weakest levelsince Dec. 3, 2010.

“We are eyeing dollar-franc parity on the back of furtherdeterioration in investor confidence in Europe,” said PeterRosenstreich, the chief currency analyst at Swissquote Bank SA inGeneva.

Russia's ruble depreciated the most in a month against thedollar and South Africa's rand fell to a three-week low as theeuro-region crisis sapped demand for higher-yielding assets.

The ruble dropped as much as 1.8 percent to 32.60 per dollar,the sharpest decline since June 22. The rand slipped as much as 1.8percent to 8.4370 per dollar, the weakest level since June 28.

Bloomberg News

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