Euro hits 12-year low against dollar on negative bond yields

NEW YORK (Reuters) - The euro's unrelenting fall accelerated on Wednesday, shedding 1.5 percent to trade near $1.05 for the first time in 12 years, as the European Central Bank's 1.1 trillion euro bond-buying program sent the region's bond yields to record negative levels.

The single currency has declined 12 percent against the greenback since January and is about 5 percent from parity, Reuters data showed.

"It could easily reach parity in the short term," said Athanasios Vamvakidis, head of European G10 foreign exchange strategy at Bank of America Merrill Lynch in London.

The euro also fell against other major currencies. It struck a seven-year low against sterling at 70.145 pence and an 18-month low of 128.29 yen .

The ECB on Monday began buying sovereign bonds to try to boost growth and inflation in the euro zone, sending yields on the debt of nearly all its member countries to record lows and driving investors away from the euro. [GVD/EUR]

German two-year Schatz yields fell to a record low of minus 0.241 percent, while French two-year yields hit a low of minus 0.149 percent.

"You have very weak yields in the euro zone," said Charles St. Arnaud, currency strategist at Nomura Securities International in New York. "People are selling euro fixed-income assets to diversify away from the euro."

On pace for its worst quarter on record, the euro slid to a near 12-year low of $1.0509 on Wednesday in U.S. trading. It was down 1.45 percent on the day at $1.0541, according to Reuters data.

About a third of the euro's fall this year has come since Friday, when a stronger-than-expected U.S. jobs report fueled speculation the U.S. Federal Reserve could raise interest rates as soon as mid-2015.

The U.S. central bank has scheduled a two-day policy meeting next week, when analysts expect it to drop a reference to being "patient" from its policy statement to signal it is preparing to raise rates. [FED/DIARY]

Expectations that the Fed will end its near-zero rate policy amid a tightening labor market propelled the greenback to a 7-1/2-year high against the yen on Tuesday of 122.04 . It was last up 0.26 percent at 121.45 yen.

The dollar climbed 0.9 percent to a 12-year high of 99.985 against a basket of major currencies <.DXY>. By this measure, it overtook Japanese stocks this week as the best-performing major asset in 2015.

The British pound fell below $1.50 for the first time since July 2013 and was last down 0.9 percent at $1.4933 .

The greenback rose 1.6 percent to trade above 7.00 Danish crowns for the first time since 2003. It also gained 1.5 percent to 8.2050 Norwegian crowns , its highest level against that currency since May 2002.

(Additional reporting by Jemima Kelly and Patrick Graham in London; Editing by Toby Chopra, Lisa Von Ahn and Paul Simao)

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