LONDON, Jan 10, 2011 (AFP) - The euro briefly dropped under $1.29 on Monday, its lowest point since September as eurozone bond rates struck record highs on fresh concerns over the region's debt and deficit problems, analysts said.
The European single currency fell to $1.2830 in Asian deals. It recovered in early London trade to stand at $1.2900, compared with $1.2912 in New York late Friday.
Against the Japanese currency, the dollar rose to 83.16 yen from 83.06 yen on Friday.
"Europe's debt woes are dominating market action," said Kathleen Brooks, an analyst at trading group Forex.com.
"This could spread from a debt crisis to a currency crisis and that is why the euro is finding it hard to get its footing even after a disappointing US non-farm payrolls report for December."
The bond markets were tense on Monday as rates on debt issued by countries seen to be most at risk in the eurozone -- led by Portugal -- jumped sharply ahead of several critical bond sales this week.
The yield or rate of return on Spanish 10-year bonds rose to 5.562 percent from 5.526 percent on Friday at the close, the highest rate since 2000.
The rate on Portuguese 10-year debt rose to 7.104 percent from the closing value on Friday, when it reached a record of 7.193 percent during trading.
Investors are concerned that when Spain and Portugal issue more debt this week they will have to offer exceptionally high interest rates to attract lenders.
Meanwhile on Sunday, Germany denied a report saying it plans, together with France, to press Portugal to seek a pre-emptive bailout in order to avoid Spain and Belgium from becoming the next euro crisis casualties.
"It is not the German government's strategy to force Portugal to call (on) Europe's rescue fund," government spokesman Steffen Seibert told the Handelsblatt daily, refuting an earlier report by German weekly Spiegel.
On Monday, Spanish Finance Minister Elena Salgado insisted that Portugal would not need a bailout despite its spiralling borrowing costs.
Elsewhere, weak US jobs data was casting a shadow over the dollar. The US economy created just 103,000 jobs in December, official data showed on Friday, many fewer than the 150,000 forecast by analysts.
In London on Monday, the euro changed hands at $1.2900 against $1.2912 late in New York on Friday, at 107.27 yen (107.26), A£0.8320 (0.8296) and 1.2465 Swiss francs (1.2489).
The dollar stood at 83.16 yen (83.06) and 0.9661 Swiss francs (0.9672).
The pound was at $1.5505 (1.5559).
On the London Bullion Market, the price of gold rose to $1,370.63 an ounce from $1,367 late on Friday.
