The euro was under pressure in Asia Wednesday as markets fretted over whether debt-ridden Spain would seek a full bailout, while a credit downgrade of five of the country’s regions also weighed on the unit. The single currency bought $1.2977 and 103.61 yen in Tokyo morning trade, down from $1.2978 and 103.64 yen in New York late Tuesday and well off the levels above $1.30 and 104 yen seen earlier this week.
The dollar was flat at 79.83 yen against 79.84 yen, after briefly topping 80 yen in Asian trade on Tuesday — the first time since early July.
Dealers are increasingly concerned Madrid has yet to ask for a rescue, despite the poor state of its economy, while Moody’s cut the ratings of five regions, citing their weak financial positions and looming debt redemptions.
A large-scale Spanish bailout would enable the European Central Bank to launch a 500-billion-euro bond-buying programme aimed at helping debt-stricken eurozone members contain their soaring borrowing costs. Madrid has already accepted a 100-billion-euro rescue for its stricken banks.
“The market is jittery as it doesn’t know when Spain will ask for a bailout,” said Daisaku Ueno, senior foreign exchange and fixed income strategist at Mitsubishi UFJ Morgan Stanley. Spain, the eurozone’s fourth-largest economy, is entering a second year of recession, according to the nation’s central bank, as its leaders struggle to curb a bloated public deficit.
