Euro At 10-year Low Versus Yen, Italian Borrowing Costs Drop

The euro stood practically still versus the dollar on
Wednesday, as traders looked ahead to the new year for clues about
the health of the European system. At the same time, the euro
dropped to its lowest since 2001 versus the yen. A significant
number of market players remained away from their desks, extending
the Christmas break on a morning bereft of major economic news from
either side of the Atlantic. Those at work were treated to the
results of a surprisingly successful Italian bond auction. The
Italian Treasury sold its maximum target of EUR 9 billion of
179-day bills at a rate of 3.251 percent, half of the euro-record
6.504 percent paid in the previous auction held on November 25.
Demand also improved with the bid-to-cover ratio rising to 1.69
from 1.47. The euro was steady at $1.3070 versus the dollar, more
than a penny from an 11-month low of $1.2944 set December 14. The
single currency weakened to Y100.79 versus the yen, but was firm at
GBP 0.8360 versus the sterling. The threat of ratings agency
downgrades for France and Germany is looming, but Europe has been
eerily quiet for the past few days, following an unexpected
injection of bank liquidity from the European Central Bank. The ECB
last week pumped a record EUR 489.191 billion into the Eurozone
financial system in the first offering of its three-year loans in
its latest effort to boost liquidity. The greater take-up of the
long term loans by banks boosted hopes that a credit crunch in the
Eurozone can be avoided. Further, it was also expected that banks
may use these funds to buy euro area sovereigns bonds. 2012 is
shaping up to be a pivotal year for the euro zone -- some analysts
say that competitive imbalances and the burdens of sovereign debt
could splinter the monetary union. Greek officials insists they
will cling to euro zone membership, and Germany appears
increasingly willing to play a role in keeping its profligate
cousins in the loop. In economic news, the U.K. job market is set
to face its toughest year in two decades next year as unemployment
is forecast to rise further, a think tank reportedly said
Wednesday. Unemployment is forecast to climb to 2.85 million by the
end of 2012 and the jobless rate will rise to 8.8 percent, the
Chartered Institute of Personnel and Development (CIPD) said.
Joblessness is seen peaking at 2.9 million in the first half of
2013. Industrial production in Japan declined a seasonally adjusted
2.6 percent on month in November, the Ministry of Economy, Trade
and Industry said in Wednesday's preliminary reading. The material
has been provided by Instaforex Company - instaforex.com