Reuters: US Dollar Report: REFILE-FOREX-Euro gains broadly; yen plunges on easing bets

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REFILE-FOREX-Euro gains broadly; yen plunges on easing bets Oct 22nd 2012, 14:27 Mon Oct 22, 2012 10:27am EDT * Euro climbs after Spanish regional election results * Uncertainty over when Spain will request bailout caps gains * Yen drops vs dollar, euro on BoJ easing expectations By Julie Haviv NEW YORK, Oct 22 (Reuters) - (Refiles to correct bullet point on Yen to show that it dropped agains both the dollar and the euro) The euro gained against the dollar and struck a 5-1/2-month high against the yen on Monday as regional elections in Spain over the weekend removed a potential obstacle for the country's prime minister to request a bailout. The euro, up about 1.6 percent against the dollar so far in October, gained support from comments by European Central Bank policymaker Joerg Asmussen who reiterated the bank's commitment to do everything in its power to show the euro is irreversible. Spanish Prime Minister Mariano Rajoy's People's Party secured victory in his home region of Galicia, boosting his austerity drive. "In short, the strong showing in Galicia indicates that Rajoy may now have the political capital to make a formal appeal for a bailout which would be viewed positively by the market," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. Prime Minister Rajoy, however, faces another test on Nov. 25 when the economically powerful Catalonia holds its regional elections. For now, the market is relieved that Spain remains relatively unified and that Prime Minister Rajoy can proceed with plans for stabilizing the country's economy, Schlossberg said. The euro last traded at $1.3048, up 0.3 percent, with resistance expected around $1.3139, the Oct. 17 high. Traders reported talk of a large $1.3050 options expiry that could keep it pinned close to that level. Expectations that Spain will apply for a bailout, prompting the European Central Bank to start buying its bonds, have helped support the euro in recent weeks, although uncertainty over the timing of such a move was also seen limiting gains. "A lack of negative news out of Europe should help the euro for the moment at least," said Richard Falkenhall, currency strategist at SEB in Stockholm. He said the euro could rise to $1.34 or $1.35 over the coming weeks, adding the U.S. presidential election and the country's looming 'fiscal cliff' of budget cuts and tax hikes could switch the market's attention towards the United States and away from the euro zone. YEN PLUNGES The yen fell broadly after data showing Japan's exports tumbled in September added to growing expectations of more policy stimulus from the Bank of Japan when it meets next week. The euro rose more than 1 percent versus the yen to a 5-1/2 month high of 104.40 yen. It last traded at 104.18, up 0.9 percent on the day. The dollar hit a peak of 79.86 yen, its strongest since mid-July, gaining momentum after breaching resistance at its 200-day moving average around 76.42 yen. It last traded at 79.82, up 0.7 percent on the day, according to Reuters data. Strategists said the yen could rebound strongly next week if the Bank of Japan disappoints expectations and keeps policy on hold. Societe Generale analyst Sebastien Galy recommended paring long dollar/yen positions and maintaining a strategy of buying the dollar on dips. The Canadian dollar fell to a two-month low of C$0.9949 against the U.S. dollar as the market positioned for the prospect of a more dovish tone from the Bank of Canada at its rate setting meeting on Tuesday. In addition, weekly data showed speculators' net long positions in the Canadian dollar are the biggest among major currencies, at about 9.5 billion U.S. dollars, leaving the Canadian unit vulnerable to profit-taking. Link this Share this Digg this Email Reprints

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