Reuters: US Dollar Report: FOREX-Euro wobbles on Spanish debt and economy worry

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FOREX-Euro wobbles on Spanish debt and economy worry Apr 27th 2012, 08:30 Fri Apr 27, 2012 4:30am EDT * Euro slips as Spain concerns reignite * S&P downgrades Spanish debt, Spanish yields above 6 percent * Italy bond auction in focus * Yen firmer as Bank of Japan easing measures underwhelm By Neal Armstrong LONDON, April 27 (Reuters) - The euro fell against the dollar and the yen on Friday as a rise in Spanish government bond yields after a ratings downgrade and poor economic data in Spain reignited concerns over euro zone debt markets ahead of an Italian bond auction. Standard & Poor's cut its Spain's credit rating to BBB-plus from A late on Thursday and gave it a negative outlook, warning it expects the government's budget deficit to deteriorate even more than previously thought due to economic contraction. Spanish data released Friday highlighted the extent of economic weakness in the highly indebted country, with nearly a quarter of the nation's workforce unemployed and retail sales falling for the 21st consecutive month. The euro was down around 0.3 percent against the dollar at $1.3170 and 0.5 percent at 106.45 yen. Spanish 10-year bond yields moved back above 6 percent on Friday, while investors sought safety in German bond futures which rose to record highs. "The euro is suffering this morning on renewed worries over peripheral euro zone countries," said Jeremy Stretch, Head of European Currency Strategy at CIBC Global Markets. "If you look at the downgrade and economic data out of Spain it makes pretty grim reading and spreads in Italy seem to be blowing out as well." The market was also looking at debt auction by Italy due Friday morning. Rome will sell up to 6.25 billion euros of bonds. The market is pinning its hopes on support from domestic banks, which has helped Italy push auctions through even when spiralling concerns last November threatened to tip the country into a Greek-style debt crisis. Traders said further weakness in the euro may be hampered by the extent of short positions already established in the common currency. Bids were reported around $1.3140 with offers back at $1.3220. With the euro under renewed pressure, the dollar index popped up 0.3 percent to 79.203, from a 3-1/2-week low of 78.823 plumbed on Thursday. YEN RISES The yen was firmer after further easing measures from the Bank of Japan were seen as incremental rather than significant steps to try and dig the Japanese economy out of the doldrums. The Bank increased bond buying by 10 trillion yen, expanding the target of its bond purchases to bonds with up to three years left to maturity from those with two years or less, and increased its buying of stock ETFs. The Bank also extend the period of its asset purchases to June next year from December. The dollar down 0.4 percent at 80.64 yen off overnight highs of 81.45 as Japanese exporters were quick to buy the Japanese currency after hype about the BOJ's easing for weeks. Traders said the BOJ's easing was no bazooka that would push the dollar beyond its 11-month peak of 84.187 hit last month. "Basically we all know that the BOJ, the Fed and the ECB have no choice but to print more money as lenders of last resort. I see the dollar stuck in a range this quarter, around 80-84 yen," said Hideki Amikura, forex manager at Nomura Trust and Banking. Traders say the dollar has strong support from the cloud top of its weekly Ichimoku charts at 80.42. Another pivotal point will be 80.10, a 50 percent retracement of its rally from February to March. Link this Share this Digg this Email Reprints

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