The euro dropped to a five-week low against a buoyant U.S. dollar on Tuesday, after the European Central Bank tightened lending conditions for Greek banks, raising concerns the lenders could run out of cash.
The ECB left emergency liquidity aid for Greek banks at current levels but increased the haircuts on the collateral it demands. That fueled fears Greece’s problems will spread to other southern European countries as well.
German 10-year Bund yields fell to their lowest since early June and rate differentials moved against the euro, which also fell to a six-week trough against the yen.
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