The euro dropped more than 1 percent versus the dollar and yen as Italy’s borrowing costs increased at a five-year note sale, stoking concern its new government will struggle to contain debt turmoil. Italy’s Treasury auctioned 3 billion euros ($4.1 billion) of September 2016 notes, the maximum target. The yield was 6.29 percent, up from 5.32 percent at the previous auction and the highest since June 1997. Demand rose to 1.47 times the amount on offer, from 1.34 times last month.  Former European Union Competition Commissioner Mario Monti will head a new government as Italy reaches outside the political arena for a leader to restore confidence in its ability to cut the euro region’s second-biggest debt. Italy’s President Giorgio Napolitano offered the position of premier to Monti after the resignation of Silvio Berlusconi.

Yields on Spanish 10-year bonds rose above 6 percent today for the first time since Aug. 5. The European Central Bank was said to resume its purchases of government debt, including buying Spanish and Italian securities, on Aug. 8.

The franc snapped a two-day gain versus the dollar, sliding 1 percent to 90.86 centimes versus the dollar, after the Federal Statistics Office said producer and import prices decreased 1.8 percent last month from a year earlier. Swiss National Bank President Philipp Hildebrand is proving intervention in foreign-exchange markets can succeed as speculators bow to his decision to cap the franc against the euro as he seeks to stave off the threat of deflation. The currency has depreciated 10 percent against the euro and 13 percent versus the dollar since Sept. 5, the day before the central bank imposed a ceiling at 1.20 per euro.

Sterling fell 1 percent to $1.5899 after the Chartered Institute of Personnel and Development said its gauge of U.K. hiring fell to minus 3 in the fourth quarter from minus 1 in the previous three months.