Reuters: US Dollar Report: FOREX-Yen rallies after BOJ, Italy debt sale lift euro

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FOREX-Yen rallies after BOJ, Italy debt sale lift euro Oct 30th 2012, 12:32 Tweet Share this Email Print Tue Oct 30, 2012 8:32am EDT * Yen hits one-week high vs dollar, two-week high vs euro * BOJ eases policy, but some had expected more * Euro up versus dollar as Spain Q3 GDP less bad than feared * Italy debt auctions also help euro * Volumes thin as giant storm closes U.S. market By Nia Williams and Anooja Debnath LONDON, Oct 30 (Reuters) - The yen rose broadly on Tuesday after monetary easing steps from the Bank of Japan disappointed some market players who had positioned for a more aggressive increase in asset purchases. The euro also gained against the dollar after data showed the Spanish economy contracted slightly less than expected in the third quarter and Italy's borrowing costs at a sale of five- and ten-year debt. Volumes were thin with U.S. markets closed as one of the biggest storms ever to hit the United States battered the eastern seaboard. The BOJ increased its monetary stimulus for a second month runinng, this time by 11 trillion yen ($138.5 billion). The yen gained after this, with traders saying there had been speculation of a bigger stimulus. "It was a very sceptical response to the BOJ policy meeting, made worse by the fact they have revised lower the growth and inflation outlook. That has seen the yen unwind a lot of the softer tone we saw going into this meeting," said Jane Foley, senior currency strategist at Rabobank. The dollar hit a one-week low of 79.28 yen on EBS trading platform, breaking below important chart support at the 200-day moving average at 79.52. It was last down 0.4 percent on the day at 79.43 yen. Friday's four-month peak of 80.38 was expected to act as resistance for the dollar. The euro also fell to a two-week low of 102.175 yen before paring losses to last trade down 0.1 percent at 102.87 yen. SPAIN, ITALY NEWS LIFT EURO The euro climbed 0.4 percent against the dollar to $1.2935 as data showed the Spanish economy contracted for a fifth straight quarter in the three months to September at a slightly slower rate than forecast. It was also helped by improved demand at an Italian debt auction. "There's been a little bit of speculative buying of euro/dollar because the Spanish GDP data was not so bad as feared," said Paul Bednarczyk, head of research at 4CAST. In Madrid, Cortal Consors economist said any suggestion that the GDP number marked an upturn for Spain was "a mirage". Market players cited bids at $1.2850-80 which should help limit any losses, and expected buying ahead of the 200-day moving average at $1.2834. "We are very much in a range trade at the moment of $1.28-$1.32," Bednarczyk said. Gains for the euro looked likely to be capped by concerns about whether Greece can agree a deal on more austerity, and uncertainty over when Spain might request financial aid. Spanish Prime Minister Mariano Rajoy said on Monday he would seek a credit line from the euro zone's rescue fund "when I think it is in the interests of Spain". Still, expectations the European Central Bank will start a bond buying programme after Madrid asks for a bailout limited speculative euro selling. Traders reported option expiries at $1.2900 and $1.2925, which could keep the euro close to those levels. Strategists said it was too early to tell what impact the destruction caused across the Atlantic by the giant storm Sandy might have on currency markets. Demand for the dollar tends to rise in times of reduced appetite to take on risk, but if widespread damage prompted speculation the Fed might ease policy further to shore up the economy, the dollar could fall. The U.S. dollar earlier hit a three-month high against the Canadian dollar of C$1.0020 and broke back above parity, seen as a key technical level. Tweet this Link this Share this Digg this Email Reprints Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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