Reuters: US Dollar Report: FOREX-Euro slips to three-week low as Spain fears persist

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FOREX-Euro slips to three-week low as Spain fears persist Oct 1st 2012, 04:14 Mon Oct 1, 2012 12:14am EDT * Euro's technical tone weakens-strategist * Investors increased dollar-short positions last week By Lisa Twaronite TOKYO, Oct 1 (Reuters) - The euro fell to a three-week low in early Asian trading on Monday, after an audit of Spain's banks failed to quell concerns about the country's progress towards a bailout needed to shore up its public finances. Investors also continued to await the outcome of Moody's rating agency's latest review of Spain's sovereign rating, which may see it downgraded to junk status. Weak economic data from Japan and China also sapped investors' appetite for risk, to the benefit of safe-haven currencies. An independent audit released on Friday showed Spain's banking sector would need 59.3 billion euros in additional funds to cope with an economic downturn but Spain said it would ask for only 40 billion euros in European aid for its banks. "Basically, the result of Spain's bank audit was not bad news in itself, but worries remain about that country and about Greece as well," said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo. Inspectors from the "troika" of international lenders - the International Monetary Fund, the European Central Bank and European Commission - are scheduled to return to Athens this week to assess Greece's fiscal progress. The euro stood at $1.2821, down about 0.3 percent from Friday's late U.S. levels. Early on Monday, it fell as low as $1.2804, breaking below support at its 200-day moving average at $1.2823. Technical indicators for the euro suggest a decline, said Marc Chandler, global head of FX strategy at Brown Brothers Harriman in New York. "Over the last two weeks, we have been observing a deterioration in the tone of the major foreign currencies against the dollar," Chandler said in a weekend note to clients. "This has continued over the past week and looks set to continue." A likely cross of the euro's 5-day moving average below its 20-day moving average would confirm the downtrend, he said. The latter is now at $1.2884 and the former is now at $1.2871. A break of the $1.2775-$1.2800 area would signal another 1 to 2 percent decline, while a move above the $1.3000-50 area would be needed to signal any new leg higher, Chandler said. Resistance is seen at $1.2960, the 38.2 percent retracement of its Sept. 17-27 slide. Despite the euro's weaker technical tone, currency speculators boosted bets against the dollar in the latest week to the highest in more than a year, according to data from the Commodity Futures Trading Commission released on Friday. The euro also skidded about 0.5 percent against the yen, falling to 99.84, not far from a two-week low of 99.64 hit on Thursday. The dollar was down about 0.2 percent against the yen but off a more than two-week low of 77.43 yen hit on Friday, changing hands at 77.88 yen. Market reaction was muted to media reports that Japanese Prime Minister Yoshihiko Noda has decided to name Koriki Jojima, a senior lawmaker in the ruling Democratic Party of Japan, as the country's new finance minister in a cabinet shakeup expected later on Monday. The Bank of Japan's quarterly tankan survey of business sentiment released on Monday showed big Japanese manufacturers expect the dollar to average around 79.06 yen in the fiscal year through March 2013. The tankan survey showed that big manufacturers' mood worsened in the latest quarter and they expect it to keep sagging, dragged down by weak Chinese and European export demand. Data on Monday showed China's official factory purchasing managers' index rose to 49.8 in September from August's 49.2, which was the lowest since November 2011. The figure was in line with expectations but stayed below the expansion threshold of 50, indicating continued contraction in activity. Unease about Spain's situation as well as lacklustre Chinese data pressured commodity currencies, with the Australian dollar slipping 0.4 percent to $1.0336, after hitting a three-week low of $1.0327. Link this Share this Digg this Email Reprints

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