Reuters: US Dollar Report: FOREX-Euro steady near 2-week low, eyes on Spain's woes

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FOREX-Euro steady near 2-week low, eyes on Spain's woes Sep 27th 2012, 04:52 Thu Sep 27, 2012 12:52am EDT * Protests in Spain, Greece weigh on euro * Euro hovers near 2-week lows vs dollar and yen * Support for euro seen at 200-day MA near $1.2826 By Ian Chua and Masayuki Kitano SYDNEY/SINGAPORE, Sept 27 (Reuters) - The euro held steady versus the dollar on Thursday, hovering near a two-week low, as violent protests against austerity measures in Spain and Greece highlighted the challenges facing highly-indebted euro zone countries. The single currency held steady at $1.2876, not far from a two-week low of $1.2835 set the previous day. The euro has support at the 200-day moving average near $1.2826, with additional support seen roughly around $1.2740, the 38.2 percent retracement of the July to September rally. Spain's reluctance to request a bailout and trigger the European Central Bank's new bond-buying programme has weighed on the euro, which came under pressure on Wednesday as Spanish 10-year bond yields again topped 6 percent. "In this environment, unless there is news of a Spanish bailout, I think the momentum is for a weaker euro," said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong. A request by Spain for a bailout could change the picture, but such action does not appear imminent, he added. Such a formal request for aid is a condition needed for the ECB to activate its new bond buying scheme and help lower Spain's borrowing costs. "I think eventually we'll crack through the 200-day moving average and move lower, with the euro/dollar likely to test below the $1.28 level," Kotecha added. Demonstrators clashed with police on the streets of Athens and Madrid this week in an upsurge of popular anger at new austerity measures being imposed on two of the euro zone's most vulnerable economies. "Spain will be the focal point of the markets today as Prime Minister (Mariano) Rajoy presents his economic reforms and 2013 budget," analysts at BNP Paribas wrote in a client note. Still, investors were wary of getting too bearish on the euro since sentiment could shift if Spain were to ask for aid. As well, nobody wanted to stock up on the U.S. dollar as the Federal Reserve is running its own stimulus programme. That confluence of factors saw the common currency down just around 2.2 percent from a peak of $1.3173 set on Sept. 17, only a small correction that could yet turn full-scale if sentiment continued to sour, traders warned. At the back of the market's mind is Moody's review on Spain's ratings expected this week. A possible sovereign rating cut could take the country below investment grade and add further pressure on policymakers. The euro's woes helped keep the safe haven yen on firm footing. The euro eased 0.1 percent versus the yen to 99.99 yen , having hit a two-week low of 99.71 yen the previous day. The dollar dipped 0.1 percent to 77.66 yen, inching back in the direction of a seven-month low of 77.13 yen hit on Sept. 13, the day the Fed announced its new round of aggressive monetary stimulus. Link this Share this Digg this Email Reprints

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