Reuters: US Dollar Report: FOREX-Euro halts slide, Canadian dollar skids to 2-month low

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FOREX-Euro halts slide, Canadian dollar skids to 2-month low Oct 22nd 2012, 03:43 Sun Oct 21, 2012 11:43pm EDT * Euro steadies after Spanish regional election * Uncertainty remains on when Spain will request bailout, capping euro * Canadian dollar hits 2-month low on BoC expectations * Yen near 2-month low on BOJ easing hopes By Hideyuki Sano and Ian Chua TOKYO/SYDNEY, Oct 22 (Reuters) - The euro crept up on Monday after Spain's prime minister won a boost for his austerity drive with an election victory while the Canadian dollar was the big loser in Asia trade on expectations that the central bank may drop its hawkish tone following tame inflation data. The single currency stabilised around $1.3040, up slightly from late U.S. levels, helped by Prime Minister Mariano Rajoy's victory in his home region of Galicia on Sunday, which was seen as removing a hurdle for Madrid to apply for international aid. The euro had fallen for two days late last week from a one-month peak of $1.3140 after Spain made no moves to seek help at a European Union summit. Uncertainty over when Spain would request a bailout to drive down the cost of its borrowings remained, and traders expect the euro to stay in a range. Some analysts said the euro has limited chance of breaking above its September high of $1.31729. "The euro will likely be peaking out around $1.32. There will remain uncertainty on Spain's bailout request. And if it does, the market may think that the euro will have run out of euro-positive factors," said Minori Uchida, chief forex analyst at the Bank of Tokyo-Mitsubishi UFJ. CANADIAN DOLLAR The Canadian dollar was the big loser among the G-10 currencies on Monday, sliding to a two-month low as the market positioned for a more dovish tone from the Bank of Canada at its rate setting meeting on Tuesday. Data on Friday showed the country's September inflation at a low of 1.2 percent, providing little justification for the central bank to maintain a hawkish position. In addition, the latest weekly data from U.S. financial watchdog showed speculators' net long positions in the Canadian dollar are the biggest among major currencies, at about 9.5 billion U.S. dollar, leaving the Canadian unit vulnerable to profit-taking. The U.S. dollar rose to as high as C$0.9949, matching its high in late August. There are also growing expectations of more policy stimulus from the Bank of Japan when it meets next week which kept the yen under pressure. Some analysts, however, remained sceptical that the BOJ will deliver any major action at its Oct. 30 meeting and warned about holding long dollar/yen positions. "There is a lot of hope there they will do something big. History is sadly a poor lead and it would be prudent to pare down these long USDJPY positions early and maintain a strategy of buying on dips," said Sebastien Galy, strategist at Societe Generale. The dollar last stood at 79.30 yen, flat from late U.S. levels, but near the two-month high of 79.47 yen hit on Thursday. Chartists say the U.S. currency needs to close above its 200-day moving average, at 79.43 on Monday, to extend its rally while in terms of flows, Japanese exporters are ready to sell into any rally above 79.50. The Australian dollar was similarly hemmed in, with buying support emerging below $1.0200 and selling interests coming in above $1.0400. It last stood at $1.0320, little changed so far on the day. Aussie dollar bulls are also likely to be wary of getting too carried away ahead of Wednesday's inflation report, where another tame number will no doubt bolster expectations of a November rate cut. Link this Share this Digg this Email Reprints

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