* Spain protests, bailout hesitancy weigh on euro
* Euro support intact at 200-day moving average near $1.2826
* Dollar bids cited at 77.50 yen
By Masayuki Kitano and Lisa Twaronite
SINGAPORE/TOKYO, Sept 26 (Reuters) – The euro held steady
against the dollar on Wednesday, with its upside seen capped by
concern about Spain’s hesitancy to request a bailout even as
protests there turned violent.
The euro struggled to gain ground on the dollar, dogged by
uncertainty over when Spain will seek external aid, a condition
for the European Central Bank to start buying Spanish debt to
bring down the country’s borrowing costs.
The market kept its focus on Spain after protesters clashed
with police in Madrid on Tuesday, as the Spanish government
prepared a new round of unpopular austerity measures for the
2013 budget to be announced on Thursday.
The euro held steady at $1.2899, not far from
Tuesday’s low of $1.2886, which was the euro’s lowest level
since Sept. 13. The euro has shed roughly 2 percent since
hitting a four-month high near $1.3173 last week.
Demand for euros from some market players that were caught
off guard by its recent rally may lend the single currency some
support, but its gains are likely to be limited in the near
term, said Satoshi Okagawa, senior global markets analyst for
Sumitomo Mitsui Banking Corporation in Singapore.
“I think what we’re seeing is a reversal of some excessive
moves that we saw earlier,” Okagawa said, referring to the
euro’s recent short-covering rally that had lifted the single
currency about 9 percent from a two-year low hit in late July.
Any rise in the euro to levels above $1.30 is likely to be
short-lived, and the single currency will probably have a hard
time staying above 100 yen, he added.
Against the Japanese currency, the euro held steady at
One possible support level for the euro versus the yen is
near 100.14 yen, the 38.2 percent retracement of the euro’s
rally that lasted from late July to mid-September.
Against the dollar, possible support for the euro lies near
$1.2826, its 200-day moving average.
“The euro should find support at levels around $1.28… If
that is breached, I think that would suggest that a try for the
upside has ended,” said a trader for a European bank in Tokyo,
adding that the euro may then start falling towards $1.25.
One currency that could get a boost if the euro falters is
the safe haven yen, traders say.
Capped by its own problems, the euro could slip below 100
yen over the course of the day, said Yuji Saito, director of
foreign exchange at Credit Agricole in Tokyo.
The dollar may also slip toward 77.50 yen, but the U.S.
currency may then rebound as there are heavy dollar bids at that
level, Saito said. Wariness that Japanese authorities might
intervene to stem any yen rise will also probably limit the
dollar’s drop against the yen, he added.
The dollar held steady at 77.77 yen, not too far from
a seven-month low of 77.13 yen hit on Sept. 13, the day the U.S.
Federal Reserve announced aggressive monetary stimulus to
promote the economy’s recovery.
Traders say the yen could get a lift this week from Japanese
fund repatriation ahead of half-year book-closings, although
some market participants said many companies had already covered
their needs so such flows were unlikely to be significant.