Euro falls vs dollar as Spain rescue details elusive

The euro slipped from the top of its recent trading range against the dollar on Friday as a perceived lack of progress on a Spanish bailout request curbed demand for the single currency.

By (Reuters)

Published: Fri 19 Oct 2012, 8:23 PM

Last updated: Fri 3 Apr 2015, 8:18 AM

Expectations Spain will ask for a bailout helped the euro rally to a one-month high this week but uncertainty about when such a request might come has made investors wary of driving the euro zone common currency much higher.

European leaders moved closer to establishing a single euro zone banking supervisor at a summit on Thursday but talked little about the problems facing debt-ridden Spain and Greece.

A bailout request from Spain would enable the European Central Bank to buy Spanish bonds and drive down Madrid’s borrowing costs. That would probably increase investor appetite for perceived riskier currencies against the safe-haven dollar, such as the euro.

“We are feeling the effects of no real catalysts, indecision within the EU and a large technical range,” said Marc Principato, director of SMB Forex Trading And Education in New York. “The euro/dollar is still trading within the 1.2800 to 1.3160 range and I believe will continue to do so until after the US election.”

The euro was last 0.2 percent lower on the day at $1.3037, having hit a one-month high of $1.3139 on Wednesday. It has traded in the same range since mid-September.

Traders reported bids around $1.3000 to $1.3020 that could provide support.

Some US$2.28 billion in euros changed hands using Reuters Dealing.

“We are missing the decisive news that might push us out of this range. It is most likely going to be some political news like a move from Spain,” said Ulrich Leuchtmann, head of FX research at Commerzbank in London.

The single currency was up 0.7 percent against the dollar for the week and 1.6 percent higher versus the yen.

But strategists said many remained cautious and were looking to profit by selling the euro near the top of the range.

“Our survey of euro/dollar positioning suggests a market betting on a wide range-trading environment strategically, while tactically looking to sell euro/dollar on rallies,” Societe Generale strategist Sebastien Galy wrote in a client note from London.

Other analysts said the euro’s rally since late September was overdone given the weak economic outlook for the euro zone.

Yen weakens

Easing worries over the euro zone and some recent strong US data has helped keep the yen near five-month lows versus the euro and a two-month trough against the dollar.

The dollar traded flat at 79.20 yen, near a two-month high set on Thursday, while the euro fetched 103.27 yen , down 0.3 percent, after touching a five-month peak on Thursday.

Speculators have recently sold the yen on expectations the Bank of Japan will take another easing step at its policy meeting on Oct. 30, following up on its easing last month.

However, the dollar’s advance is likely to slow as Japanese exporters are waiting to sell, and immediate resistance is seen at its August peak.

The Australian dollar fell 0.1 percent to $1.0352, off a three-week high touched on Thursday.

More news from Business
In-store shopping regains trust


In-store shopping regains trust

What is happening now is that as Covid-19 cases continue to decline, residents are regaining confidence in in-store shopping. This is according to a Kearney study in which UAE respondents cite convenience (51 per cent), enhanced shopping experience (49 per cent) and competitive pricing (44 per cent) as the main motivators driving them back to brick and mortar stores

Business3 days ago