Reuters: US Dollar Report: FOREX-Euro drops, yen rises as Spain's budget eyed

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FOREX-Euro drops, yen rises as Spain's budget eyed Mar 29th 2012, 16:09 Thu Mar 29, 2012 12:09pm EDT * Euro stop-loss orders triggered below $1.33 * Italy's debt auction solid but Spain makes market jittery * Yen climbs as equity markets slide By Luciana Lopez NEW YORK, March 29 (Reuters) - The euro slid against the dollar and the yen on Thursday as investors, nervous about Spain's budget presentation on Friday, dumped riskier assets before the end of the first quarter. The single currency has declined steadily in recent sessions after touching a nearly four-week high earlier this week on comments from U.S. Federal Reserve Chairman Ben Bernanke, who indicated supportive monetary policy will remain in place. But with several key risk events for the euro zone's sovereign debt crisis slated for the next few days, investors are squaring positions, said Nick Bennenbroek, head of currency strategy at Wells Fargo Bank in New York. "We've had a few good days for the euro," he said. With a broader bias to sell euros still pervading the market, investors are now booking profits on some of those advances, he added. Euro-zone events slated for Friday added to investor nervousness: Spain's budget, which will show how far the government will tighten its belt, and a meeting of euro-zone finance ministers, where policymakers are expected to increase the combined lending ceiling of their two bailout funds. Spain's budget "is a very dicey game," said Karl Schamotta, senior markets strategist with Western Union Business Solutions in Calgary. An austere document could spur relief in bond markets. "However, the reality is that that will slow growth and cause problems for them down the road," he said. "If the budget is on the softer side, we could see bond markets capitulating and participants concerned that we are not seeing enough resolve." For trading, that means volatility ahead, Schamotta said. Italian and Spanish bond yields were already rising on Thursday despite a broadly successful sale of Italian bonds, as investors switched into low-risk German debt. The euro fell 0.35 percent to $1.3267 and touched its lowest since the start of the week. Traders said automatic stop-loss sell orders were triggered on the euro's break below $1.33 after the European Commission's economic sentiment index dipped by 0.1 percent, with sentiment in industry becoming markedly worse. Analysts said the euro was unlikely to break out of its recent range of roughly $1.30 to $1.35. Expectations about the rescue fund's size have been tempered by European Central Bank governing council member Jens Weidmann, who is also the Bundesbank chief. He warned that raising the firewall around stricken euro-zone members would only buy time. YEN RISES BROADLY The euro fell 1.03 percent on the day to 109.17 yen . The Japanese currency gained broadly on demand linked to the end of Japan's financial year and as European and U.S. equity markets followed Asian bourses into negative territory. Wednesday was the last day for spot trading in Japan's business year that will end on March 31. But real-money flows from Tokyo kept major currencies under pressure against the yen, with exporters selling the dollar in large amounts, market players said. The dollar fell 0.66 percent to 82.30 yen and touched a near three-week low, triggering reported stop-loss orders on the break of 82.35/40. But many strategists said the dollar should reassert itself against the yen as long as upcoming U.S. data does not support a recent rise in concerns about growth. "There's definitely a lot of month-end and quarter-end rebalancing, but the bigger story we are seeing is some bond buying and equity selling in the last 24 hours," said Geoff Kendrick, currency strategist at Nomura. Hong Kong and China shares extended losses on Thursday, with the Shanghai Composite Index closing at its lowest since Jan. 16 on worries about the slowdown in the world's second-largest economy. The growth-linked Australian dollar fell 0.66 percent to USD$1.0321, also hurt by the concerns about China. Link this Share this Digg this Email Reprints

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