The euro fell against most of its major peers as Spain's bailout spurred concern that the sovereign-debt crisis is deepening as it spreads among indebted nations before Greek elections June 17.

The 17-nation currency earlier rose, touching a two-week high, after Spain asked for as much as 100 billion euros ($126 billion) to save its banking system, making it the fourth member of the currency bloc to seek a rescue. The bailout helped move Italy to the front lines of the crisis, as bets increased Europe's third largest economy may be the next one to succumb. Norway's krone strengthened as consumer prices rose more than economists forecast last month.

"Given that we've decisively rejected any sustained price action above $1.26 and have a lot of unanswered questions around the Spanish bank package and the Greek elections this weekend, the near-term prognosis for the euro is not good," said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York.

The euro fell 0.3 percent to $1.2482 at 5 p.m. New York time. It earlier climbed as much as 1.2 percent to $1.2671, the highest since May 23 and the biggest intraday advance since Nov. 30. The euro fell 0.3 to 99.16 yen after rising as much as 1.5 percent. The dollar declined 0.1 percent to 79.44 yen.

Futures traders increased net bets against the shared currency versus the dollar to a record high for a fifth straight session last week. So-called net shorts rose by 11,003 to 214,418 contracts for the period ended June 5, Commodity Futures Trading Commission data showed.

"The move up in the euro overnight was a healthy move because it probably took out a lot of weak shorts," said Steve Butler, director of foreign-exchange trading in Toronto at Bank of Nova Scotia's Scotia Capital unit. "Seeing it back below $1.25 here today is very disappointing price action, and I wouldn't be surprised to see the euro continue its grind lower this week going into the Greek elections over the weekend."

The 14-day relative strength index for the euro versus the dollar rose above 30 on June 4 for the first time in 10 days, ending the longest streak since 2008. When the index moves below 30 it indicates an asset's decline may have been overdone. The gauge reached 37 Tuesday.

The British pound gained 0.1 percent to $1.5486 and added 0.4 percent to 80.61 pence per euro.

"While the U.K. has its own intractable problems and a pretty weak economic environment, it probably still looks if you want to remain in Europe it's a slightly better bet than the euro," said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. "There are still plenty of risks out there as far as the euro is concerned, so it's still a case of markets looking to sell rallies."

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, rose 0.1 percent to 82.622 after falling as much as 1 percent.

Seven months after winning a landslide victory, Spanish Prime Minister Mariano Rajoy was forced to abandon his bid to recapitalize banks without external help. The bailout loan will be channeled through the state's bank-rescue fund, known as FROB, and extended to lenders that need it, Economy Minister Luis de Guindos Jurado said in Madrid on June 9.

The European currency has fallen 3.7 percent in the past six months, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has gained 2.4 percent and the yen is 0.3 percent stronger.

Spanish and Italian 10-year bonds fell for a fourth day, reversing earlier gains. The Spanish yield rose 29 basis points to 6.51 percent, while the rate on the Italian securities climbed 26 basis points to 6.03 percent.

(Bloomberg)