The single European currency slid against the dollar again on Thursday after Italy’s borrowing costs surged in a bond auction and investors fled to safer territory ahead of a European Union summit in Brussels.
Italy’s borrowing costs surged after the Italian government sold 5.4 billion euros worth of five- and 10-year bonds. Italy sold 2.9 billion euros in 10-year government bonds with yields rising to 6.19 percent from 6.03 percent in an auction held in late May and 2.5 billion euros of five-year bonds at a yield of 5.84 percent compared with 5.66 percent in late May.
The euro was trading at 1.2433 versus the dollar on Thursday afternoon, down from 1.2468 on Wednesday’s close.
Market participants expect the euro to fall further against the greenback if EU leaders fail to agree on measures to wrest eurozone countries out of the sovereign debt crisis.
European leaders are gathering in Brussels on Thursday to focus on short-term efforts to stem rising yields in the eurozone peripheral countries, and discuss a comprehensive and long-term strategy for economic and monetary union reorganization.
Italy’s Prime Minister Mario Monti has warned of potential disaster if Europe’s leaders fail to club together and find a way to keep interest rates on Italy’s debt down, The Guardian reported.
“If Italians lose hope, this could unleash political forces which say ‘let European integration, let the euro, let this or that large country go to hell’, which would be a disaster for the whole of the European Union,” the paper quoted Monti as saying.