Euro sinks close to 12-year low versus dollar

The euro tumbled Tuesday towards a 12-year low against the dollar, hit by eurozone stimulus, growing US rate hike speculation and Greek debt concerns, dealers said.

In London, the European single currency sank to $1.0722 at the close—its lowest level since mid-April 2003. The region’s stock markets also retreated, with London’s benchmark FTSE 100 index dropping 2.52 percent.

The shared eurozone unit continued to flounder one day after the European Central Bank launched its 1.1 trillion euro ($1.2 trillion) quantitative easing (QE) stimulus “bazooka”.

The dollar neared an eight-year high against the yen as dealers bet on an interest rate hike from the Federal Reserve after bright US payrolls data.

The greenback surged in Asian trading hours to a high of 122.03 yen, a level not seen since July 2007. It closed at 121.21 yen in London.

Record-low bond yields

Meanwhile, the yield on German, Italian and Spanish 10-year government bonds fell to new record lows on the ECB bond-buying programme to combat deflation and boost growth.

The rate of return to investors on 10-year German government bonds fell to 0.230 percent from 0.312 percent on Monday.

The yield on 10-year Italian government bonds fell to 1.219 percent from 1.280 percent and those of Spain to 1.231 percent from 1.275 percent.

Europe’s main stock markets fell into the red, mirroring losses in Asia, as concerns lingered over Greek debt talks, while official data showed fresh weakness in economic powerhouse China.

“Sentiment has been hit by a number of factors, not least the return of ‘Grexit’ fears after the troubled nation was accused of time wasting,” said Fawad Razaqzada, technical analyst at FOREX.com.

“The consensus is that it will eventually be able to gain access to part of its remaining bailout funds (but) any further delay in the negotiations will undoubtedly unnerve some traders,” he said.

London’s FTSE lost 2.52 percent to 6.702.84 points, while in Paris the CAC 40 fell 1.12 percent to 4,881.95 points.

Frankfurt’s DAX 30 index slipped 0.71 percent to 11,500.38 points after setting a new record high on Monday.

“Global equity markets came under renewed pressure in today’s session as ongoing concerns regarding the European QE programme and the strong rally in the US dollar weighed heavily on market sentiment and limited risk appetite,” said Myrto Sokou, senior research analyst at Sucden Financial.

‘Athens dragging heels’

Greece has agreed to start urgent technical talks on Wednesday on extending its crucial bailout after its eurozone partners accused debt-stricken Athens of wasting time in previous negotiations.

The main talks will be in Brussels but teams from Greece’s creditors will also be on the ground in Athens, Eurogroup chief Jeroen Dijsselbloem said, despite the new left-wing government’s earlier insistence that they should not return.

The announcement came after a meeting of eurozone finance ministers in Brussels on Monday, at which the Greek government outlined the reforms demanded by lenders in exchange for further cash.

“Athens is dragging its heels over reforms and patience is running low in Brussels,” said IG analyst David Madden.

“The Greek government is pushing the envelope with its creditors and the market is scared by the prospect of another long drawn-out debt negotiation.

“The ECB’s government bond-buying scheme is being overshadowed by Greece, and if Athens keeps pushing its creditors around it may receive a rap on the knuckles.”

Strong dollar hits US stocks

US stocks dropped Tuesday amid worries about the strong dollar, reversing Monday’s strong performance as last week’s volatility looked set to continue.

In early afternoon trade, the Dow Jones Industrial Average was down 1.35 percent to 17,751.65 points.

The broad-based S&P 500 fell 1.24 percent to 2,053.70, while the tech-rich Nasdaq Composite Index dropped 1.38 percent to 4,873.90.

Analysts cited concerns about the strong US dollar, expectations for higher US interest rates and uncertainty about the eurozone’s debt negotiations with Greece for the market weakness.