Forex - Spanish fears knock down EUR/USD

Investing.com - The euro moved lower against the U.S. dollar Tuesday, trading close to a 22-month low, as rising Spanish borrowing costs and banking fears sent investors into the safety of the greenback.

EUR/USD hit 1.2548 during U.S. morning trade, the session high; the pair subsequently consolidated at 1.2504 giving back 0.31%.

The pair was likely to find short-term support at 1.2495, Friday’s low and a 22-month low and resistance at 1.2623, Monday’s high.

Traders were nervous amid concerns over the situation in Spain, where rising bond yields, the growing costs of bank rescues and a recession burdened economy fuelled fears that Madrid will be forced to seek an international bailout.

Earlier Tuesday, Spain’s Treasury auctioned EUR8.5 billion of six-month bonds at an average yield of 2.10%, a six-month high, up from 1.77% at a similar auction last month.

The yield on Spanish 10-year bonds rose to 6.48% following the auction, hovering just below the 2012 high of 6.50% hit Monday after the government announced that it was to recapitalize one of the country’s largest commercial lenders.

However, investor sentiment found some support after Chinese media reports fuelled speculation that Beijing may soon launch an economic stimulus program, to counter signs of a slowdown in growth in the world’s second largest economy.

In greenback bearish news,  data showed that the S&P/Case-Shiller U.S. home price index fell at an annualized rate of 2.6% in March, declining for the 21st consecutive month.

A separate report by the Conference Board showed that U.S. consumer confidence declined unexpectedly in May.

The euro was little changed against the pound and the yen, with EUR/GBP dipping 0.04% to hit 0.7994 and EUR/JPY inching down 0.01% to hit 99.64.

In other news Tuesday, preliminary data indicated German consumer price inflation eased by 0.2% in May, compared to expectations for a 0.1% decline.