The euro was weak in Asian trade Tuesday as optimism fizzled over a Eurozone deal to save Spain's troubled banks, with questions about the plan and wider Europe concerns weighing on the unit.
The common currency was changing hands at $1.2483 in Tokyo morning trade, well below Monday's rally which saw the unit soar past the $1.26 level, and just a shade higher than $1.2482 in New York trade late Monday.
It also dipped against the Japanese currency, edging down to 99.03 yen from 99.13 yen in New York, after jumping past the 100-yen level on Monday in Asia.
The dollar dipped to 79.33 yen from 79.43 yen.
Standard Chartered Bank said it expects foreign exchange markets "to shift back to a more defensive footing this week," adding that the euro's pullback reflected a "deep-seated skepticism" towards the 17-nation Eurozone currency.
The unit, which tumbled to multi-year lows against the dollar and yen in recent weeks, staged a strong rally in Asia on Monday following news of a 100-billion-euro ($125 billion) loan to help Spain rescue its bank sector.
However dealers said there were few concrete details about the plan, which threatened to add to Madrid's already huge public debt, while wider Eurozone tensions loomed ahead of fresh Greek elections on June 17.
There are growing fears about a Greek exit from the Eurozone amid a wave of anti-austerity sentiment in the debt-ridden nation, a result that could spell disaster for Europe and the world economy.
"Governments in Spain and Italy are particularly vulnerable to a poor outcome to the Greek elections," Standard Chartered said.
"The higher the risk of a Greek exit, the more difficult it is likely to be for Spain and Italy to access funding markets, potentially forcing recourse to a full-blown bailout."
Spain's borrowing costs surged on Monday with 10-year government bond yields hitting 6.508 percent, well above Friday's close of 6.216 percent before the Eurozone agreement.
Italy's 10-year yields, meanwhile, leapt to 6.035 percent from 5.77 percent.
"Contagion fears were piqued by Italian 10-year yields breaching 6.0 percent," National Australia Bank said in a note.
"Greece's elections next Sunday also are adding to investors' fears and uncertainty," it added.
The vote will be a closely-fought duel between the pro-bailout New Democracy conservatives and the anti-austerity radical Syriza leftists, who have pledged to overturn reforms imposed under an EU-IMF loan agreement.
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