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FOREX-Euro hovers near 2-week low, eyes on Spanish budget

by on September 27, 2012 8:19 am GMT
 

Thu Sep 27, 2012 4:19am EDT

* Spanish budget in focus, may lead to aid request

* Euro near two-week lows vs dollar and yen

* Support for euro seen at 200-day MA near $1.2826

By Anirban Nag

LONDON, Sept 27 (Reuters) – The euro hovered near a two-week
low against the dollar on Thursday with uncertainty about when
Spain would request a rescue programme expected to limit gains.

Spain is expected to present its 2013 budget draft later on
Thursday. A credible budget along with comprehensive structural
reforms could build the foundation for meeting conditions for a
Spanish aid package and intervention by the European Central
Bank in the bond market, analysts said.

The euro was flat at $1.2867, just above a two-week
low of $1.2835 set the previous day. The euro has support at the
200-day moving average near $1.2826 and around $1.2740, the 38.2
percent retracement of the July to September rally.

Talk that Chinese authorities might take steps to prop up
the country’s stock markets had earlier bolstered riskier
currencies like the Australian dollar and lent some support to
the euro against the safe-haven dollar and Japanese yen.

The country’s securities regulator holds a regular meeting
on Thursday.

“A combination of no fresh negative news from the euro zone
and talk of additional measures from China has helped the euro,”
said Simon Derrick, head of currency research at Bank of New
York Mellon.

“However, the reaction to the Spanish budget and whether
Spain is going for a bailout or not in the near term along with
the clear and present danger that Greece presents will be
factors that will keep gains limited.”

Spain’s reluctance to request a bailout and trigger the ECB
bond buying has weighed on the euro, which came under pressure
as Spanish 10-year bond yields again topped 6 percent.

“In this environment, unless there is news of a Spanish
bailout, I think the momentum is for a weaker euro,” said Mitul
Kotecha, head of global foreign exchange strategy for Credit
Agricole in Hong Kong.

A bailout request by Spain could change the picture, but
that does not appear imminent, he added.

“I think eventually we’ll crack through the 200-day moving
average and move lower, with the euro/dollar likely to test
below the $1.28 level,” Kotecha added.

A Moody’s review of Spain’s ratings is also expected this
week. A cut could take the country below investment grade and
put further pressure on policymakers.

GREECE TOO

Demonstrators clashed with police in Athens and Madrid this
week in an upsurge of anger at new austerity
measures.

Greece’s international lenders are at loggerheads over how
to respond to its debt crisis, threatening more trouble for the
euro in the coming weeks.

For now though, the euro held steady against the yen,
trading at 100.10 yen after having hit a two-week low
of 99.71 yen on Wednesday.

The dollar was slightly lower at 77.70 yen, inching
back towards a seven-month low of 77.13 yen hit on Sept. 13, the
day the Federal Reserve announced a new round of monetary
stimulus.

Meanwhile, the growth-linked Australian and New
Zealand dollars both rose 0.3 percent against the
dollar to $1.0400 and $0.8250 respectively.