NEW YORK - The euro plunged below the $1.30 (S$1.69) line Wednesday to its lowest level since January 11, hit by new nerves over Italy's ability to maintain financial stability.
Steady early in the day, the euro took a sharp dive after US markets opened to as low as $1.2912 (S$1.678) before rebounding slightly. At 2200 GMT, the euro was trading at $1.2934 (S$1.681), down from $1.3070 (S$1.6991) late Tuesday.
"With the overhanging fear about the eurozone sovereign debt crisis, the opening of US cash equity trading saw a flight to safety and a move into safe haven currencies like the Japanese yen and US dollar," said MoneyCorp analyst Mark Deans.
There was some encouragement at first when Italy raised 9.0 billion euros (S$15.34 billion) at a rate of 3.251 per cent for six-month notes, half the 6.504 per cent it paid in November.
But some analysts suggested that European banks making use of low-cost European Central Bank money were largely behind the auction's success. Sentiment soured as yields on 10-year Italian bonds jumped to a painfully high 6.9 per cent on the markets, raising worries about Rome's plans to sell longer-term bonds on Thursday.
"Market jitters are still there in regards to the 10-year debt on offer by Italy in tomorrow's trading session," said Deans.
He added that thin trading conditions ahead of the year-end were also exacerbating moves in the foreign exchange market.
The euro slipped to 100.80 yen (S$1.6858) from 101.77 yen (S$1.702) Tuesday. The dollar was at 77.90 yen (S$1.3028), up from 77.88 (S$1.3025).
The dollar bought 0.9427 Swiss francs (S$1.300) compared to 0.9340 francs (S$1.2889). The British pound dropped to $1.5450 (S$2.008) from $1.5669 (S$2.036).