Two-year low for euro amid Spanish bailout fears

World equity markets sold off and the euro set new two-year lows against the dollar yesterday after reports that more indebted regions in Spain need financial aid fuelled fears that the country may need a bailout.

Investors fled to safe-haven government debt and the US dollar as Spain’s plight, concerns about economic growth and renewed market talk of a possible Greek exit from the eurozone drove investment decisions.

The euro slid as low as $1.2067, its weakest since Jun 2010, but later pared losses to trade slightly higher at $1.2131. Against the yen, the euro slid near a 12-year low at 94.22 but later trimmed losses.