Euro slides to two-month low

The 85 billion euro bailout package extended to the Irish government failed to assuage investors' concerns about the stability and creditworthiness of the eurozone's peripheral nations, as markets sold out of risk assets and the euro on Monday. The U.S. dollar and the Japanese yen rose to two-month highs against the euro, and equities markets around the world sold off.

"The euro is unable to sustain even modest upticks, and its weakness is dragging down other major currencies," Marc Chandler, the global head of currency strategy at Brown Brothers Harriman, told Bloomberg News. "The European debt situation is getting more serious. It's not just about Ireland and Portugal anymore; Spain and Italy are being hit even harder."

Notably, the price of credit-default swaps for Spanish and Portuguese debt reached record levels today. There appears to be a kind of chain reaction sweeping across Europe, as investors' attention has been transferred from Greece to Ireland and now to the Iberian peninsula.

Portugal, like Ireland,  has passed harsh austerity measures. But even if the coastal country did come close to failure, bailing it out would be relatively inexpensive compared to the fallout from a Spanish debt crisis. Spain is simply too big to backstop, and bondholders might finally be forced to take losses on their investments.

That's the fear that's putting such intense pressure on the euro.