Euro falls below $1.22 in Asia

The euro was under fresh selling pressure to fall below $1.22 in Asia trade on Friday after ratings agency Moodys on Friday downgraded Italys government bond rating.The common currency bought $1.2195 and 96.74 yen in Tokyo morning trade, from $1.2203 and 96.75 yen in New York.On Thursday, the European single currency hit $1.2167, its weakest level since late June 2010.Investors sought the relative safety of the dollar and yen as the focus in the market is returning to European debt problems, Sumino Kamei, senior analyst at Bank of Tokyo-Mitsubishi UFJ, said in a note.The euro faced additional pressure after ratings agency Moodys downgraded Italys government bond rating by two notches, citing the knock-on effects of a possible Greek exit from the eurozone and Spains banking woes.In reducing the rating to Baa2 from A3, Moodys said that Italy was now more likely to experience a further sharp increase in its funding costs or the loss of market access for borrowing to service its budget. The move lowered Italys rating to two notches above junk-bond status, and came just hours before the eurozone heavyweight attempts to raise 5.25 billion euros in a government bond auction.All things considered, its amazing that the euro hasnt fallen even further, said Nicholas Smith, equity strategist at CLSA, noting a lack of concrete market-moving catalysts.Japans finance minister said Friday that he is confident in Europes ability to carry out ambitious steps such as establishing a common banking sector supervisor and forging closer unity on fiscal policy. (European officials) are working on significantly challenging issues, but I believe they are capable of overcoming this situation and gaining the confidence of markets, Jun Azumi said following the rating announcement. The market was largely unaffected by Chinas announcement Friday morning that its economy grew by 7.6 percent in the second quarter of 2012, the slowest pace in more than three years.This dragged down growth for the worlds second-largest economy to 7.8 percent for the first half of the year, Chinas National Bureau of Statistics said.