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TOKYO (Reuters) - The euro was hammered to a near 12-year trough against the yen and plunged to record lows versus the Australian dollar on Monday, starting the week under strong pressure from fears that Spain may 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 the terms of a loan of up to 100 billion euros on Friday for Madrid to recapitalize its banks.
The euro bought 94.66 yen, having fallen as far as 94.59, a trough not seen since late 2000. Against the greenback, it touched a 25-month low around $1.2103, creeping ever closer to the 2010 trough around $1.1876.
Traders cited talk of an option barrier at $1.2100.
"With such strong risk aversion it is the yen and the dollar that will keep gaining against risk currencies," said Teppei Ino, currency analyst at the Bank of Tokyo-Mitsubishi UFJ in Tokyo. "The Spanish scenario has not been priced in yet."
More bad news emerged over the weekend from the debt-ridden country when another region, Murcia, said on Sunday it would seek government financial assistance, while media reported half a dozen regional governments were ready to follow in the footsteps of Valencia.
"There is nothing good from Europe and that keeps the euro under pressure, especially the first half of the week when we have euro zone data", said Yuji Saito, director of foreign exchange at Credit Agricole Bank in Tokyo, referring to consumer confidence and manufacturing reports due on Monday and Tuesday.
According to Reuters data, the euro reached an all-time low against the Australian dollar at A$1.1671, taking losses so far this month to more than 5 percent.
Traders said fears of slower Chinese growth added to the gloom, ahead of flash HSBC manufacturing data on Tuesday. Later in the week, figures on U.S. and UK GDP 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 83.66, extending Friday's 0.7 percent gain.
The Japanese currency rose 0.4 percent on the greenback. The dollar last fetched 78.19, marking a seven-week.
With Asian bourses on the back foot, the Aussie, which posted a solid 1.3 percent rise last week despite Friday's pullback, tumbled 0.5 percent to $1.0317.
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, the outlook for which this week hinges on consumer inflation figures due on Wednesday.
Benign inflation data could take some momentum from the currency by raising speculation of another RBA interest rate cut.
Additional reporting by Ian Chua, Masayuki Kitano and Chikako Mogi; Editing by Kim Coghill