Euro falls to lowest against yen in over a decade

The euro tumbled below 95 yen for the first time in almost 12 years on Monday as dealers rushed to the safe-haven Japanese unit owing to growing fears about Spain's debt crisis, AFP reports. The common currency dipped as low as 94.61 yen in morning Asian trade -- its lowest level since November 2000 -- from 95.38 in New York trade on Friday. It was changing hands at 94.70 yen by 0310 GMT. The euro was also weak against the dollar, treading around two-year lows at $1.2115, while the dollar bought 78.21 yen. The euro fetched $1.2152 in New York trade Friday while the dollar was at 78.48 yen. Dealers have been moving out of the euro after the borrowing costs on 10-year Spanish bonds soared to euro-era highs above seven percent, which is seen as unsustainable for the government to service. With yields so high, unemployment at 24 percent and the economy expected to remain in recession throughout next year, analysts say Madrid will likely need a bailout on top of the one agreed for the country's banks last week. The Japanese currency -- which hit record highs against the dollar last year -- has been increasingly viewed as a safe-haven amid worries about Europe and a lumbering US economic recovery. But the strong currency has taken a toll on Japan's exporters by making their products pricier overseas while shrinking the value of their foreign income. Officials in Tokyo have repeatedly warned that the yen was overvalued and previously intervened in forex markets in a bid to temper the unit. "As I've been saying, I will take decisive steps against speculative movement of excessive volatility," Japanese Finance Minister Jun Azumi told reporters. "As far as the current situation is concerned, I'm watching it carefully," he said in Tokyo Monday, according to Dow Jones Newswires. Also Monday, the government said the Japanese economy faces growing downside risks stemming from the European debt crisis, adding that it was increasingly concerned about the outlook for the nation's export sector. In its monthly economic report for July, the Cabinet Office said the overall economy was "on the way to recovery at a moderate pace". But a Cabinet Office official added that: "The downward pressure on our economy through negative effects on exports and financial markets is increasing." "Against the euro, we've been seeing quite a strong yen," the official said. National Australia Bank said in a note that "Europe is to blame with a renewed flare up in euro-peripheral bond markets," noting Spain's 10-year borrowing costs spiked to euro-era highs. Japan's Prime Minister Yoshihiko Noda held talks with Bank of Japan governor Masaaki Shirakawa on Monday morning, Jiji Press and other media said. Shirakawa declined to give details of the talks after the meeting, and said only said the pair had "a frank exchange of opinions", the reports said.