FOREX-Euro off 7-week high, weighed down by Spain auction, weak data

Wed Dec 5, 2012 11:00pm IST

* Spanish yields sharply higher after disappointing bond
sale
    * Weak euro zone retail sales data
    * ECB rate decision and U.S. jobs data ahead

    By Wanfeng Zhou
    NEW YORK, Dec 5 (Reuters) - The euro slipped from a
seven-week high against the dollar on Wednesday after a
disappointing Spanish bond auction and weak euro zone economic
data prompted investors to book profits on recent gains.
    Optimism that Greece will receive more money from its
international lenders had buoyed the euro over the past week,
but the rally lost steam as worries about Spain resurfaced. Th e
technical outlook also looked bearish after a break above $1.31.
    "My theory is that this is the last week of an equity market
rally, and therefore the last week of a euro/dollar rally," said
Andrew Busch, senior currency strategist at BMO Capital in
Chicago.  
    Busch noted that the euro/dollar reached a new high on
Wednesday at $1.3125 and then traded lower. He said if it closed
below Tuesday's close of around $1.3094 "then we have an
'outside reversal' technical pattern and should point to lower
euro/dollar on a short term basis."
    Spain auctioned fewer bonds than it hoped to, sending yields
sharply higher and reviving talk of an official bailout request
from Europe's fourth-largest economy. 
    A sharp fall in euro zone retail sales for October dented
hopes of a consumer-led recovery from recession, which also
pressured the euro.  
    The euro fell 0.2 percent to $1.3074, retreating from
a session peak of $1.3126 on Reuters data, the highest since
Oct. 18. It was the first fall in the euro against the dollar in
six trading sessions.
    Further chart resistance is located at the October high
around $1.3140 and the September high around $1.3170.
    Against the yen, the euro rose 0.4 percent to 107.67
, having risen as high as 107.95 on Reuters data, a
7-1/2 month high. It also hit a 2-1/2 month high against the
Swiss franc, extending recent gains after Switzerland's largest
banks said they would charge for some franc deposits.
    The dollar rose 0.6 percent to 82.39 yen.
    Investors have been expecting a more dovish stance from the
Bank of Japan if the main opposition party wins a Dec. 16
election as seems likely.
    
    ECB, U.S. JOBS DATA AHEAD
    Camilla Sutton, chief currency strategist at Scotia Capital
in Toronto, said she expects a broader range of $1.26 to $1.32
in the euro in the near term.
    "There is still too much uncertainty to drive euro back to
its year-to-date highs (near) $1.35; accordingly we would expect
the current rally to top out."
    The European Central Bank meets on Thursday and is expected
to keep rates on hold but the bleak outlook for the euro zone
has kept expectations of further easing alive. 
    On Friday, the U.S. Labor Department releases its
closely-watched nonfarm payrolls data for November.
    U.S. private-sector employers added 118,000 jobs in
November, a report by a payrolls processor showed on Wednesday.
Economists surveyed by Reuters had forecast the ADP National
Employment Report would show a gain of 125,000 jobs. 
    A separate report showed the pace of growth in the U.S.
services sector increased more than expected in November.
 The data had a limited impact on currencies.
    Some strategists said the euro could also weaken if signs
intensify that U.S. policymakers are struggling to avert the
so-called fiscal cliff, fuelling worries the global economy
could suffer, and lifting demand for the safe-haven dollar.
    The fiscal cliff is a combination of tax hikes and spending
cuts due to kick in early next year that could tip the world's
biggest economy into recession.
    "Nothing is going on" in the talks, U.S. House Majority
Leader Eric Cantor told reporters following a meeting with
fellow Republicans. "We ask the president to sit down with us."
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