July 23, 2012 / 12:53 AM / 5 years ago

Euro extends losses in Asia on Spanish jitters

A picture illustration shows a 100 Dollar banknote laying on one Dollar banknotes, taken in Warsaw, January 13, 2011.Kacper Pempel

SYDNEY (Reuters) - The euro fell to a near 12-year trough on the yen and plumbed record lows versus its Australian counterpart on Monday, starting the new week under pressure on persistent fears that Spain will eventually need a full sovereign bailout.

Such was the lack of market confidence that Spanish bond yields hit their highest levels since the euro was created, even as euro zone finance ministers approved on Friday the terms of a loan of up to 100 billion euros for Madrid to recapitalize its banks.

The euro bought 95.10 yen, having fallen as far as 94.88, a trough not seen since November 2000. Against the greenback, it hit a 25-month low around $1.2103, creeping ever closer to the 2010 trough around $1.1876.

Versus the Australian dollar, the common currency reached an all-time low around A$1.1670, taking losses so far this month to more than 5 percent.

Also weighing on the single currency, German magazine "Der Spiegel" reported on Sunday, without citing sources, that the IMF may not take part in any additional financing for Greece.

Traders said fears of slower Chinese growth added to the gloom, ahead of HSBC manufacturing data on Tuesday. Later in the week there are figures on U.S. and UK GDP that are expected to show softness.

"We're trending lower in the euro and this week you'll probably see a retracement in some of the recovery that we saw in riskier assets over the last week or so," said Greg Gibbs, strategist at RBS in Singapore.

With risk aversion back on the rise, the safe-haven U.S. dollar and yen found good support. The dollar index .DXY rose 0.2 percent to 83.653, extending Friday's 0.7 percent gain.

On the yen, the greenback fetched 78.44, having dipped to a seven-week low around 78.38 in early trade.

The Aussie, which posted a solid 1.3 percent rise last week despite Friday's pullback, was at $1.0349. It scaled a 2-1/2 month peak of $1.0445 on Thursday, brushing against stiff resistance at $1.0470/75 -- highs seen in late April.

Talk of more stimulus from the U.S. Federal Reserve and diversification of central banks' currency holdings had bolstered the Aussie, whose outlook this week hinges on consumer inflation data due on Wednesday.

Another tame number could take some steam out of the currency, as it could raise speculation of another interest rate cut. Ahead of that, producer inflation is due at 0130 GMT. Forecasts center on a very benign 1.0 percent reading, versus the second quarter last year.

Editing by Wayne Cole

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