Reuters: US Dollar Report: FOREX-Euro hovers near 2-week lows, focus on Spain budget

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FOREX-Euro hovers near 2-week lows, focus on Spain budget Sep 27th 2012, 14:05 Thu Sep 27, 2012 10:05am EDT * Spanish budget in focus, may lead to aid request * Euro near two-week lows vs dollar and yen * Support for euro seen at 200-day moving average near $1.2826 * ECB Draghi will visit Germany's Bundestag By Julie Haviv NEW YORK, Sept 27 (Reuters) - The euro was little changed against the U.S. dollar on Thursday after hitting a two-week trough the previous day as investors cautiously awaited a draft budget from Spain that could set the stage for the country to request an international bailout. Uncertainty about when and if Spain will request a rescue programme has weighed on the euro in recent sessions, with the single currency coming under pressure as Spanish 10-year bond yields hovered near 6.0 percent. Spain is expected to present its 2013 budget draft later on Thursday. A credible budget along with comprehensive structural reforms could build the foundation for meeting conditions for a Spanish aid package and intervention by the European Central Bank in the bond market, analysts said. The euro last traded at $1.2864 close, down 0.1 percent and just above a two-week low of $1.2834 set the previous day. The euro has support at the 200-day moving average near $1.2826 and around $1.2740, the 38.2 percent retracement of the July to September rally. "All eyes have been on Spain for the last week or so. We have had a big shift in euro positioning recently so going into the budget investors are probably positioned fairly neutral," said Michel Sneyd, FX strategist at BNP Paribas. Adding to concerns over Spain, the indebted Castilla La Mancha region may seek 800 million euros ($1 billion) in emergency funding from the central government, regional and party sources said on Thursday. Most strategists said the euro was likely to appreciate if and when Spain requests a bailout to trigger ECB bond-buying, although gains would be curbed by concerns about Greece. "The reaction to the Spanish budget and whether Spain is going for a bailout or not in the near term along with the clear and present danger that Greece presents will be factors that will keep gains limited," said Simon Derrick, head of currency research at Bank of New York Mellon. Demonstrators clashed with police in Athens and Madrid this week in protest over new austerity measures. Greece's international lenders are at loggerheads over how to respond to its debt crisis, threatening more trouble for the euro in the coming weeks. A Moody's review of Spain's ratings is also expected this week. A cut could take the country below investment grade and put further pressure on policymakers. European Central Bank President Mario Draghi will visit Germany's Bundestag lower house of parliament for talks with lawmakers on the euro zone debt crisis, the Bundestag said on Thursday. Many German lawmakers have major reservations about the ECB's plans to buy bonds from heavily indebted euro zone states to help lower their borrowing costs, although Chancellor Angela Merkel has made clear she supports the program. Meanwhile, talk that Chinese authorities might take steps to prop up the country's stock markets had earlier bolstered riskier currencies like the Australian dollar and lent some support to the euro against the safe-haven dollar and Japanese yen. The country's securities regulator holds a regular meeting on Thursday. MYRIAD OF MIXED U.S. DATA The U.S. dollar briefly extended losses versus the Japanese yen and temporarily erased losses versus the euro on Thursday after an array of mixed U.S. economic data. Orders for long-lasting U.S. manufactured goods dropped sharply in August suggesting the main engine of economic growth was stalling, offsetting hopeful signs of an improvement in the labor market. A separate report showed the number of Americans filing new claims for jobless benefits fell 26,000 last week to a two-month low. Additionally, U.S. economic growth was much weaker than previously estimated in the second quarter as a drought cut into inventories. The dollar last traded down 0.1 percent against the yen 77.64 and remains within sight of a seven-month high of 77.13 hit on Sept. 13, the day the Federal Reserve announced a new round of monetary stimulus. Link this Share this Digg this Email Reprints

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