Nov. 26 (Bloomberg) -- The euro traded near a two-month low amid concern Ireland's debt crisis will spread to Portugal and Spain, diminishing the appeal of the region's assets.
The common currency headed for a weekly decline versus 15 of its 16 major peers after Spanish 10-year bond yields rose for an eighth day even as the nation's Deputy Finance Minister Jose Manuel Campa said the government doesn't foresee problems tapping markets. The Australian dollar fell for a second day after central bank Governor Glenn Stevens said his country's interest rate setting is appropriate for the "period ahead."
"This government debt crisis in Europe has further to run," said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. "Portugal and Spain have shaky government finances, so their bond markets might go through a period of selloff. In that sort of environment, you would expect the euro to sell down further."
The euro traded at $1.3344 as of 9:49 a.m. in Tokyo from $1.3360 in New York yesterday, after reaching $1.3285 on Nov. 24, the lowest level since Sept. 22. The single currency has fallen 2.4 percent this week. It was at 111.73 yen from 111.69 yen. The yen bought 83.75 per dollar from 83.60, after touching 83.85 on Nov. 23, the weakest since Oct. 5.
Ireland, Spain
Ireland is set to tap a European-Union led 750 billion-euro ($1 trillion) bailout fund. The fund's size may have to be increased if it's needed to restore confidence in the euro, European Central Bank council member Axel Weber said Nov. 24.
Bonds of the euro region's most-indebted nations fell yesterday as LCH Clearnet Ltd. increased its margin requirements, or cost of trading, in Irish government securities for the third time this month. The yield on Ireland's 10-year debt climbed 18 basis points to 9.04 percent while the Spanish 10-year yield rose 11 basis points to 5.18 percent yesterday.
Portugal faces a final vote in parliament today on its 2011 spending plan, which includes measures to pare the deficit. The government said in September that it would cut wages, freeze hiring and raise value-added taxes.
The euro has fallen 2.5 percent over the past month in a measure of 10 developed-nation counterparts, Bloomberg Correlation-Weighted Currency Indexes show. The dollar is up 1.7 percent, while the yen has dropped 1.4 percent.
RBA 'Comfortable'
The Australian dollar was set for a weekly decline as Reserve Bank of Australia's Stevens signaled the central bank's benchmark interest rate of 4.75 percent was at an appropriate level for the near term.
Stevens' statement suggests the "RBA is pretty comfortable with the current level of policy and will hardly change it," said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. "The market hasn't got another hike fully priced in until July next year."
Swaps traders are betting the RBA will keep its cash target unchanged at its next meeting on Dec. 7, before raising it by 30 basis points during the next 12 months, according to a Credit Suisse Group AG index. A basis point is 0.01 percentage point.
The Australian dollar dropped 0.4 percent to 97.65 U.S cents, and slid 0.3 percent to 81.79 yen.
--With assistance from Monami Yui in Tokyo. Editors: Rocky Swift, Jonathan Annells
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