Reuters: US Dollar Report: FOREX-Euro plunges on fears over global economy, Spain

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FOREX-Euro plunges on fears over global economy, Spain Oct 23rd 2012, 14:19 Tue Oct 23, 2012 10:19am EDT * Euro falls to 1-week low versus dollar * Spainish debt yields rise as Moody's downgrades 5 regions * Yen under pressure on BoJ speculation * Canadian dollar rises after BoC announcement By Julie Haviv NEW YORK, Oct 23 (Reuters) - The euro tumbled to a one-week low versus the dollar on Tuesday as concerns about a global economic slowdown and renewed euro zone debt worries, led investors to shed risk. While the euro has gained about 0.9 percent against the dollar in October, the currency's upside is widely seen as limited given the unresolved three-year debt crisis and concerns about the damage it is doing to worldwide economic conditions. Spanish borrowing costs rose after Moody's cut the credit ratings of five of the country's regions, including economically important but deeply indebted Catalonia. Spanish and Italian 10-year bond yields, which move inversely to price, climbed. Data on Tuesday showed business morale in France's manufacturing sector slumped to its lowest level in over two years. The French data fueled fears that the euro zone's second largest economy may be on the brink of a recession, according to Joe Manimbo, senior market analyst, Western Union Business Solutions in Washington D.C. "But despite the latest flare up in worries about debt and growth in the euro region, the single currency may see its downside somewhat cushioned by expectations Spain may be weeks away from requesting an international bailout, allowing the country to tap the ECB's bond buying program to bring meaningful debt relief," he said. The euro fell as low as $1.2955, its lowest since Oct. 16, with traders reporting selling by hedge funds after the currency broke below chart support at its 200-day moving average of $1.3023. It last traded at $1.2964, down 0.7 percent on the day. But the currency remains within the $1.28 to $1.3170 range it has traded in since mid-September. The euro has strengthened recently on speculation that Spain will request aid, enabling the European Central Bank to buy its bonds. The euro's gains, however, have been limited due to uncertainty over when Spain will act. Looking ahead, initial readings of euro zone PMI data and a German Ifo business sentiment survey on Wednesday will be closely watched for signs of how well growth in the currency bloc is holding up. BOJ SPECULATION The yen remained vulnerable on expectations that the Bank of Japan will ease monetary policy at its Oct. 30 meeting. The yen earlier in the global session hit a three-month low against the dollar and a five-month trough versus the euro on expectations that the Bank of Japan will further loosen policy later this month. The dollar, however, later pared gains and fell for the first day in nine sessions against the yen to last trade at 79.84, down 0.1 percent on the day. The Japanese currency recovered, coming off its lows after Finance Minister Koriki Jojima denied a report that the government is asking the central bank to raise asset purchases by 20 trillion yen ($251 billion) to boost economic growth. The euro last traded down 0.9 percent to 103.48. "The market is a bit fixated on this meeting next Tuesday and no one wants to stand in front of a freight train," said Steven Saywell, head of FX strategy at BNP Paribas. "There's potential for disappointment. We are looking for opportunities to sell rather than chase the dollar higher." Elsewhere, the U.S. dollar fell against the Canadian dollar after the Bank of Canada said it will likely have to raise interest rates over time. The U.S. dollar last traded 0.1 percent lower at C$0.9906 , according to Reuters data. Link this Share this Digg this Email Reprints

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