Reuters: US Dollar Report: FOREX-Euro slides after two days of gains; dollar up vs yen

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FOREX-Euro slides after two days of gains; dollar up vs yen May 9th 2013, 14:18 Thu May 9, 2013 10:18am EDT * Euro takes a breather after two days of gains * U.S. jobless claims fall to lowest in more than 5 years * Spanish yields rise, weigh on euro By Gertrude Chavez-Dreyfuss NEW YORK, May 9 (Reuters) - The euro fell against the dollar on Thursday after two days of gains, hurt partly by a weaker-than-expected Spanish debt auction that served as a reminder to investors that the outlook for the euro zone's weaker nations remained uncertain. Demand for the dollar also increased following data showing U.S. initial jobless claims dropped to their lowest level in more than five years. Trader also said there was an options play on the euro -- a double no touch option between $1.32 and $1.31. That kept the euro wedged between the two figures, preventing it from moving above the $1.32 level. "Not aiding the euro was a softer-than-expected Spanish issue. Dealers ended up owning quite a bit of it, which suggested that there was weaker demand," said Dean Popplewell, chief currency strategist at OANDA in Toronto. "That has prompted the euro to back away from its highs." Spanish yields also rose on Thursday on speculation the country was planning a syndicated deal in the near future, suggesting there would be a lot of supply in a short period of time. Investors also looked to book profits on Europe's shared currency it rose for two straight days, with market participants unwilling to hold euros for a long time given the European Central Bank's stance on further monetary easing. ECB policymakers Yves Mersch and Joerg Asmussen said on Wednesday the central bank still had room to manoeuvre should the euro zone economy continue to weaken. The ECB cut its main rate to 0.5 percent last Thursday. While German industrial data beat expectations, overall economic activity across most of the euro zone remains sluggish, keeping alive expectations that the ECB may act again soon. The single currency lost ground against the British pound after the Bank of England kept interest rates on hold and left its asset buying programme unchanged. It also fell against the Australian and New Zealand dollars , which were buoyed by better-than-expected jobs numbers. Both currencies rebounded from lows struck after their central banks moved this week to tame their strength. The euro fell to session lows of $1.3094, failing to build on gains made after robust industrial data from Germany this week. It was last at $1.3097, down 0.4 percent on the day. Against the yen, the euro slipped 0.1 percent to 130.06 , while the dollar rose 0.3 percent to 99.31 yen . Lower-than-expected U.S weekly jobless claims were a big part of the dollar's rally against the yen. Initial claims for state unemployment benefits fell 4,000 to a seasonally adjusted 323,000, the lowest level since January 2008, the Labor Department said on Thursday. Economists polled by Reuters had expected first-time applications to rise to 335,000 last week. "This (U.S. jobless claims report) will keep discussions of tapering asset purchases going inside the Federal Reserve, which should help the dollar at a time when other major central banks are actively weakening their currency through lower interest rates or currency intervention," said Kathy Lien, managing director, at BK Asset Management in New York. Link this Share this Digg this Email Reprints

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