THE euro fell to a 15-month low against the US dollar after an Italian debt auction fuelled concerns about the eurozone debt crisis while strong US economic data lifted Wall Street stocks.
The euro fell below $1.29 for the first time since September 2010 after Italy, at the centre of the eurozone debt crisis, sold just over €7 billion of bonds (£5.9bn), well below its target of $8.5bn euros.
Rome sold €2.5bn euros (£2.1bn) of its benchmark 10-year bonds at an interest rate of 6.98%, which was close to the unsustainable 7% mark – but analysts said it was more important that the country was able to find buyers for its debt.
Italy has a debt burden of around 120% of GDP, and its debt levels are due to increase by about €150bn between February and April.
The high cost of borrowing maintained the pressure on the euro, which continued to slide against most major currencies including the dollar and yen, however, the pound fell against the euro at 1.18 amid fears over the potential impact the ongoing eurozone crisis could have on London.
Standard Chartered strategist David Mann said: "There's a real worry now that the first quarter could be crunch time in the euro crisis just because of the sheer volume of debt that needs to be rolled over by eurozone countries."
The European single currency fell as low as $1.2856, Reuters data said, its worst showing since September 2010, before rebounding to $1.2906.
However, the London market rose more than 1%. The FTSE 100 Index staged a last minute push to close up 59.4 points after news US weekly unemployment claims over a four-week average declined for the fourth straight week.
In London, banks were among the risers following the latest Italian debt auction, with Royal Bank of Scotland up 0.3p at 20.1p and Lloyds Banking Group 0.5p stronger at 25.5p
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