Reuters: US Dollar Report: FOREX-Euro falls on global growth woes, Spain's debt

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FOREX-Euro falls on global growth woes, Spain's debt Oct 23rd 2012, 20:42 Tue Oct 23, 2012 4:42pm EDT * Euro falls to 1-week low versus dollar * Dollar index hits nearly two-week high * Yen under pressure on BoJ speculation * Canadian dollar rises after BoC announcement By Julie Haviv and Gertrude Chavez-Dreyfuss NEW YORK, Oct 23 (Reuters) - The euro tumbled against the yen and hit a one-week low versus the dollar o n T uesday as risk appetite faded due to concerns about a global economic slowdown and a spike in Spain's borrowing costs after a ratings downgrade of the country's five regions. While the euro has gained about 1 percent against the dollar so far in October, it has closed above the key psychological level of $1.30 in only seven sessions during the month. The euro's upside is widely seen as limited, given the unresolved three-year-old debt crisis and mounting evidence that global growth is sputtering. A sharp fall in U.S. stocks added to the gloom. Poor earnings from major multinational U.S. companies confirmed fears about global growth. A top European share index also slid to its lowest level in more than one and a half months. The borrowing costs of Spain, which is under pressure to seek a sovereign bailout, rose after credit rating agency Moody's downgraded five Spanish regions. Meanwhile, data showed business morale in France's manufacturing sector slumped to the lowest in over two years, fueling concerns about the euro zone's second-largest economy. "The negative headlines have brought fresh euro sellers out of the woodwork," said Sean Cotton, foreign exchange adviser at Bank of the West in San Ramon, California. "Investors have been spooked, reverting to the safety of the greenback." The euro fell as low as $1.2950, its lowest since Oct. 16. It last traded at $1.2982, down 0.6 percent on the day. The currency, however, remains within the $1.2800 to $1.3170 range it has traded in since mid-September. The common currency 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 the currency bloc is holding up. The dollar index, on the other hand, was up 0.3 percent to 79.923, after rising to 80.062, its highest in nearly two weeks. "Continued signs that America is outpacing its rivals in recovery should provide some increasing fundamental support for the dollar over the medium term," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. Also on Tuesday, the Federal Reserve started a two-day monetary policy meeting. While officials are not expected to make any policy changes, their statement on Wednesday could have an impact on market activity. BOJ SPECULATION The yen remained vulnerable on expectations that the Bank of Japan will ease monetary policy at its Oct. 30 meeting. The Japanese currency earlier in the global session hit a three-month low against the dollar and a five-month trough versus the euro on expectations the Bank of Japan will further loosen policy later this month. The dollar, however, later erased gains and fell for the first day in nine sessions against the yen to last trade at 79.84 yen, 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. Against the yen, the euro last traded at 103.52 yen , down 0.7 percent on the day. In other trading, the U.S. dollar rose against the Canadian dollar even after the Bank of Canada announced it will likely have to raise interest rates over time. The greenback was last up 0.1 percent at C$0.9926. "Despite some mild softening in its tone, the central bank has largely retained its tightening bias, in contrast to market expectations, which generally expected a switch to a neutral stance," said Vassili Serebriakov, currency strategist at Wells Fargo in New York. Link this Share this Digg this Email Reprints

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