The euro has dropped under $1.24 for first time since July 2010.
The euro sank underneath $1.24 today as traders sought the safe-haven greenback amid heightened speculation that debt-ridden Spain could be heading for a bailout, dealers said.
At about 1500 GMT, the European single currency sank to $1.2386, touching a low point last seen on July 6, 2010. That compared with $1.2503 late in New York on Tuesday.
World stock markets also sank today on mounting concern that Spain could fall victim to a eurozone sovereign debt crisis that has already snared Greece, Ireland and Portugal.
European bond yields were also under intense pressure with borrowing prices for Spain reaching danger levels on the secondary market and Italy failing to reach its maximum target in a bond sale.
In addition, the interest rate on Spanish 10-year government bonds continued to creep towards 7% - a level that is deemed unsustainable by analysts.
Euro zone lending
Meanwhile, euro zone lending to the private sector remains weak, data showed today.
This suggested that the vast amounts of cheap cash pumped into banks earlier this year provided only scant relief from the crisis.
The European Central Bank said in regular monthly statistics that growth in loans to the private sector slowed to 0.3% in April from 0.6% in March.
The slowdown will disappoint central bank officials given that, in two special measures in December and February, the ECB lent over €1 trillion to banks at a rate of 1% for 3 years.
The thinking behind the unprecedented moves was that banks would lend the cheap funds to businesses and households and keep credit flowing in the debt-wracked euro zone economy. However, the cash does not appear to be trickling through into the real economy so far, the data suggested.
A key contributing factor seems to be that overall demand for credit remains weak, rather than the unwillingness of banks to make loans available, analysts say.
Last month, in its regular quarterly survey on bank lending, the ECB found that a tightening of credit conditions had eased "substantially" in the first three months of this year and banks were expecting that trend to continue in the second quarter as well.
But small and medium-sized businesses still complained that getting bank loans had become harder, according to a separate ECB survey.
The ECB also calculated that growth of the euro zone money supply, a key indicator of demand in the economy, slowed unexpectedly in April, with the M3 indicator falling to 2.5% last month from 3.1% in March.
The ECB regards the M3 figure as a key guide to inflation pressures and uses it to set interest rates accordingly. The central bank seeks to keep euro zone inflation below but close to 2% and it eased slightly to 2.6% in April from 2.7% in March.
All in all, the new data pointed to deflationary tendencies in the single currency area, analysts said. Consumer price data for Germany yesterday showed that inflation in Europe's biggest economy slowed to 1.9% this month, the first time in 17 months that it has been below the key level of 2%.
And that could open the door to additional ECB interest rate cuts soon, analysts said. ECB interest rates are currently at historical lows of 1% and analysts now say that the ECB is expected to trim rates in the third quarter, with July a very real possibility.
