Euro Slides as Borrowing Costs Surge at Debt Auctions

The euro dropped to a one-month low against the yen as European bond yields surged at auctions and Mario Monti, Italy’s premier-in-waiting, faced resistance to forming a Cabinet.

The 17-nation currency fell for a second day against the dollar as Italy’s 10-year yield surpassed the 7 percent threshold that prompted other European nations to seek bailouts. The dollar and yen rose against most of their major counterparts as German investor confidence fell to a three-year low, encouraging demand for a refuge.

“Sentiment is still bearish” toward the euro, said Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in London. “We are seeing a continuing offloading of peripheral positions,” he said, referring to the bonds of nations such as Italy and Spain.

The euro depreciated 0.7 percent to 104.31 yen at 8:34 a.m. New York time, after dropping to 103.98 yen, the lowest level since Oct. 10. The shared currency slid 0.7 percent to $1.3544 following a drop of 0.9 percent yesterday. The yen was little changed at 77.04 versus the dollar.

The yen rallied against all 16 of its major counterparts tracked by Bloomberg and the dollar rose as futures of the Standard & Poor’s 500 Index sank 0.6 percent. Yields on 10-year Treasuries fell to 2.02 percent.