Concerns about Spain drive euro lower vs dollar

AP News
Posted: Apr 18, 2012 3:48 PM
Concerns about Spain drive euro lower vs dollar

New concerns about Spain's financial system pushed the euro lower against the dollar Wednesday.

The Bank of Spain said the amount of bad loans on the books at Spanish banks rose to an 18-year high in February. The country's benchmark stock index fell 4 percent on the news.

The euro slipped to $1.3133 in late trading Wednesday from $1.3139 late Tuesday.

Spain has become the new focus of Europe's ongoing debt crisis following a successful debt restructuring by Greece. Traders are concerned that Spain won't be able to implement drastic budget cuts and avoid a bailout.

On Monday, the yield on Spain's benchmark 10-year government bond jumped above 6 percent, a sign that investors are less confident in the country's finances. Since then, rates have eased to just below 6 percent.

On Thursday, traders will be watching Spain's sale of 10-year bonds to see if investors are still confident enough in the country's finances to buy its debt.

Meanwhile, the British pound jumped against the dollar Wednesday after it appeared less likely that the Bank of England would launch another round of bond-buying to help the country's economy. In minutes from the central bank's latest rate-setting meeting, most of its members were against increasing the stimulus program.

Bond-buying lowers interest rates and can weigh on a currency by reducing the returns investors get from holding it. With no additional economic stimulus likely, traders bought the pound. The British pound rose $1.6034 late Wednesday from $1.5947 Tuesday.

In other trading Wednesday, the dollar rose to 81.24 Japanese yen from 80.80 yen, to 0.9154 Swiss franc from 0.9144 Swiss franc and to 99.04 Canadian cents from 98.93 Canadian cents.