Sovereign debt woes keep pressure on euro

The euro remained under pressure in Asia Thursday after rating agencies gave new warnings over eurozone debt contagion and Italy's borrowing costs topped levels seen as unsustainable.

The common currency stood at ê1.3453 in early trade, compared with ê1.3451 late Wednesday in New York and ê1.3536 on Tuesday.

It also bought 103.62 in Tokyo, from 103.65 yen in New York. The unit fetched 104.31 yen Tuesday.

The dollar was flat at 77.05 yen.

A lack of substantial measures to stem the crisis continued to bruise sentiment even as Italy and Greece put in place new governments committed to tough economic reforms.

"With little forward movement in the EU narrative despite new leadership in Italy and Greece, markets remain tense," Stewart Hall, Senior Currency Strategist at RBC Markets, told Dow Jones Newswires.

"We have a new Prime Minister and cabinet in Italy with Mario Monti as leader and finance minister but the honeymoon will be short lived as are the policy making timelines."

Fitch ratings agency said Wednesday US banks could be "greatly affected if contagion continues to spread beyond the stressed European markets" of Greece, Ireland, Portugal and Spain.

"Exposures to large European countries and banks are sizable. The ongoing economic and market effects are additional concerns," it said.

Another rating agency, Moody's, downgraded 10 public-sector banks in Germany, Europe's strongest economy, citing "less certain" government or systemic support for them in a crisis.

The agencies' warnings and dangerously high borrowing costs in Italy have strengthened risk aversion and sent global stock markets lower.

Italian benchmark 10-year bond yields once again topped the 7.0 percent unsustainable level, with Spain hit too after it had to abandon its 2011 growth target of a very modest 1.3 percent.

The market was cautiously awaiting Spanish and French bond auctions later in the day.

"Market participants focused on the negatives ahead of upcoming French and Spanish bond auctions," said Joel Murphy, Currency Analyst at Go Markets in Melbourne.

"The worry is that the (European Central Bank) will have to buy more debt to prop up the sales - this speculation did little to help market concerns," Murphy said.

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