Reuters: US Dollar Report: FOREX-Euro jumps above $1.26 on Spain bank relief

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FOREX-Euro jumps above $1.26 on Spain bank relief Jun 11th 2012, 00:29 Sun Jun 10, 2012 8:29pm EDT * Spanish deal triggers rally in riskier assets * Traders to stay cautious ahead of Greek elections * China data weak but better than traders had feared By Antoni Slodkowski TOKYO, June 11 (Reuters) - The euro was poised to stage its biggest daily rally against the dollar in almost eight months on Monday, after Spain secured help for its debt-ridden banks and as Chinese economic data, while disappointing, was not as bad as the market had feared. The 17-nation currency bloc decided to lend its fourth-largest economy up to 100 billion euros ($125 billion) to reassure investors and prevent the threat of a bank run in case Greece's crisis heats up again after its elections this coming weekend. This saw the euro jump 1 percent its highest level since May 23 at $1.2643, pulling away from a near two-year low of $1.2288 hit earlier this month. Early in the session, it rose as high as $1.2672, helped by stop-loss buying. "Euro zone leaders rose to the occasion. They had no choice. The Spanish bailout means Europe will not permit 'runs' to sink their banking system," said David Kotok, chairman of Cumberland Advisors. Against the yen, the single currency also rose as high as 100.90 yen, its highest level in more than two weeks. A string of Chinese economic data released over the weekend, while showing the extent of the country's economic slowdown, was better than many traders had feared, following its first interest rate cut since the global financial crisis on Thursday. Traders warned, however, that the optimism may be temporary, given that the European debt crisis has troubled markets for more than two years and investors will be extra cautious ahead of Greek elections on June 17. Parties that support and oppose the debt-stricken country's international bailout are neck-and-neck in opinion polls. Underscoring the prevailing bearish sentiment, bets against the euro surged to a record high in the latest week, while net long U.S. dollar positions extended gains, according to the Commodity Futures Trading Commission. Net euro shorts totaled 214,418 contracts, from net shorts of 203,415 the previous week, the data showed, raising the risk of short-covering bouts in the single currency. In line with other riskier assets, the Australian and New Zealand dollars were also higher early on Monday, with the Aussie briefly emerging above parity versus the U.S. dollar for the first time in about a month. It was last up 0.6 percent on the day at $0.9980, with the June 7 high of $1.003 serving as immediate resistance and support sitting around the June 8 low of $0.9820. With risk currencies on the offensive, the dollar index - a gauge of the greenback's performance against a basket of major currencies - fell 0.8 percent to a 2-1/2 week low of 81.786 . The dollar held its ground against the yen at 79.50 yen, as both safe-haven currencies suffered heavy losses on the back of the relief rally in riskier assets. Offers from Tokyo exporters capped the dollar's gains around 80.00 yen. Australian data, which normally moves markets during Asian trading hours, this week includes business and consumer confidence readings, and the Australian central bank's governor is scheduled to speak at an economic forum on Wednesday. Link this Share this Digg this Email Reprints

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