American focus: the euro falls to 10-year low against yen

The euro dropped against the yen to the lowest level since 2001 as the European Central Bank’s balance sheet soared to a record after it lent regional banks more money last week to keep credit flowing.

The 17-nation currency fell against the dollar to the least since January as concern increased that the region’s sovereign- debt crisis will curb growth, even as rates fell at an Italian bill sale. The dollar gained as stocks dropped, boosting demand for haven assets. The ECB’s balance sheet expanded to a record 2.73 trillion euros ($3.55 trillion). Lending to euro-area banks jumped 214 billion euros to 879 billion euros in the week ended Dec. 23, the Frankfurt-based ECB said in a statement today. The balance sheet increased by 239 billion euros in the latest period and was 553 billion euros more than three months ago.

Italy sold 9 billion euros of 179-day bills at a rate of 3.251 percent, down from 6.504 percent at the previous auction of similar-maturity debt on Nov. 25. The Treasury also sold 1.7 billion euros of zero-coupon bonds due in September 2013 at a yield of 4.85 percent, versus 7.81 percent on Nov. 25. The nation will auction as much as 8.5 billion euros of debt due between 2014 and 2022 tomorrow. Italian 10-year bond yields pared a drop after falling as much as 25 basis points to 6.75 percent. They traded at 6.94 percent, compared with more than 7 percent reached yesterday, the level that spurred Greece, Ireland and Portugal to seek bailouts.