Reuters: US Dollar Report: FOREX-Euro up vs dollar and yen on Spain cuts

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FOREX-Euro up vs dollar and yen on Spain cuts Mar 30th 2012, 18:03 Fri Mar 30, 2012 2:03pm EDT * Spain budget aims to save 27 bln euros * Euro rises, but remains vulnerable to sovereign debt worries * EU ministers agree to boost rescue fund NEW YORK, March 30 (Reuters) - The euro rallied against the dollar and the yen on Friday after budget cuts in Spain boosted hopes the country could stick to an austerity path, though mixed U.S. data capped gains. Spain presented a budget that aims to save more than 27 billion euros in 2012 through spending cuts and revenue increases. Also in Europe, euro zone finance ministers agreed to raise their financial firewall to contain the region's debt crisis. Both moves had been largely expected by markets but the euro still rallied. U.S. data did little to push currencies from recent ranges. Gains were capped, however, after the pace of business activity in the Midwest slowed and gains in consumer spending outstripped an increase in income. "We have a lot of conflicting data points, a lot of conflicting news," said Camilla Sutton, chief currency strategist at Scotia Capital. "There's no catalyst to break things out of month-long ranges." The euro rose 0.3 percent against the dollar to $1.3332 and gained 0.7 percent to 110.35 yen. The greenback swung between gains and losses against the yen but last traded up 0.4 percent at 82.73 yen with the peak at 82.78 and the low at 81.82 yen. The single currency was on track for its best quarter against the dollar in a year, up 2.9 percent, benefiting after the European Central Bank's second injection of cheap long-term funds helped ease euro zone debt worries. Both the euro and the dollar were set for strong performances against the yen in the first quarter. The yen has struggled since the Bank of Japan boosted its asset-buying program in February. That move, as well as the threat of more easing, has kept the yen on weaker ground. The dollar was on track to advance 7.5 percent against the yen this quarter, its first quarterly gain since the first quarter of 2011 and it's biggest quarterly gain since the first quarter of 2009. The euro's performance against the yen was even stronger - a climb of around 10.8 percent, its best quarterly performance since the fourth quarter of 2000.EURO STILL VULNERABLE Analysts cautioned that risk remains as markets head into the second quarter. The euro on Friday hit its lowest against the Swiss franc since mid-September, according to Reuters data, as investors tested the resolve of the Swiss National Bank to hold the euro/floor at $1.2000 francs. The single currency fell to as low as 1.2026 francs , its lowest since September 14. It was last at 1.2040 francs, down 0.1 percent. In the euro zone, many of the underlying causes of the sovereign debt crisis, such as growth differentials among the region's economies, remain in place, said Omer Esiner, chief market analyst with Commonwealth Foreign Exchange in Washington, D.C. "It's just hard to get really bullish on the euro, even when you see relatively good news," he added. Many analysts expect the euro could resume its decline in the coming quarter on concerns about indebted peripheral countries and the prospect a large economy such as Spain or Italy may need help. "The key question is whether it is possible for those countries to compete on the global market," said Anders Soderberg, currency strategist at SEB in Stockholm. "For each set of austerity measures they announce, the economy takes a step lower." U.S. data will also be key in the second quarter, including non-farms payrolls next Friday. A recent run of optimism over the world's largest economy could be setting markets up for disappointment in coming weeks, said Stewart Hall, a senior currency strategist with RBC Capital Markets in Toronto. "We don't even need to see the U.S. data tail off, just a lack of progression," he said. Link this Share this Digg this Email Reprints

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