The euro weakened to a more than two-year low against the dollar, falling below $1.21, as concern mounted that European leaders are failing to gain control of the region's debt crisis.

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

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

The euro fell 0.3 percent to $1.2120 at 7:38 a.m. in New York after falling as much as 0.6 percent to $1.2082, the weakest since June 2010 and below the average of $1.2087 since its inception in 1999. The shared currency dropped 0.6 percent to 94.86 yen. It earlier slid to 94.24 yen, the lowest since November 2000. The yen rose 0.3 percent to 78.26 per dollar.

Catalonia, Castilla-La-Mancha, Murcia, the Canary Islands, the Balearic Islands are among the Spanish regions that have admitted they may ask for aid from the central government after Valencia sought a bailout last week, El Pais reported. The Catalan regional government is trying to negotiate a bridge loan with undisclosed financial entities, the newspaper said.

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

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

The euro has slumped 5.5 percent this year, the worst performance among 10 developed-market currencies tracked by Bloomberg 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's international creditors — the European Commission, the European Central Bank and the International Monetary Fund — arrive in Athens tomorrow amid doubts the nation will meet its commitments and reluctance among euro-area states to put up more funds should it fail.

The IMF will stop paying rescue aid to Greece as it is already clear the nation will not be able to fulfill its promise to cut debt to 120 percent of annual economic growth in euro terms by 2020, Der Spiegel magazine reported, citing unidentified EU officials.

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

U.S. Treasuries, German bunds and U.K. gilts all rose as investors sought safer assets. U.S. five-, 10- and 30-year yields declined to records, as did rates on U.K. two-, five- and 10-year gilts, and two- and five-year German debt. The Stoxx Europe 600 Index 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 level since Dec. 3, 2010.

“We are eyeing dollar-franc parity on the back of further deterioration in investor confidence in Europe,” said Peter Rosenstreich, the chief currency analyst at Swissquote Bank SA in Geneva.

Russia's ruble depreciated the most in a month against the dollar and South Africa's rand fell to a three-week low as the euro-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 1.8 percent to 8.4370 per dollar, the weakest level since June 28.

Bloomberg News

Instant Insights /

Euro Lowest in Over Two Years

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