FOREX-Euro slides on German sentiment survey, Spain eyed

* Euro falls after German Ifo disappoints
* Uncertainty on Spain, Greece also undermines euro
* Germany plays down ESM leveraging prospects
* BoJ intervention on radar as dollar falls versus yen

By Julie Haviv
NEW YORK, Sept 24 (Reuters) - The euro dropped broadly on
M onday as a disappointing survey of German business sentiment
underscored global economic concerns and uncertainty over
debt-burdened Spain had investors shunning riskier assets.
The drop in German business sentiment for a fifth successive
month in September to its lowest level since early 2010 fed
fears that Germany, the strongest of Europe's economies, is
succumbing to an economic downturn despite the European Central
Bank's recently announced bond-buying plan.
Spanish government bond yields rose on signs that Madrid is
making slow progress toward asking for the international bailout
that markets are anticipating. Italian yields also rose.
Many market participants believe the euro is poised for a
pullback after a sharp rally in recent weeks that took the
common currency to a four-month high against the dollar at
$1.3169 on Sept. 17.
"We had multiple weeks of an impressive rally in equities,
commodities and the euro, but they are all vulnerable here as
investors pare back on their long positioning," said Omer
Esiner, chief market analyst at Commonwealth Foreign Exchange in
Washington, D.C.
"The German data undermined market sentiment, but there are
mounting worries about Spain as well and whether or not they
will request a bailout," he said. "Potential bickering between
Spain and Germany about the conditions of a bailout will add to
an increasingly uncertain outlook, which markets do not like."
The euro hit a session low of $1.2889, its lowest since
Sept. 13. It last traded at $1.2908, down 0.6 percent.
Initial support is seen at $1.2905, the 23.6 percent
retracement of the July to September rally, followed by its
200-day moving average, which comes in around $1.2828.
Against the yen, the euro last traded at 100.54 yen
, down 0.9 percent.
The dollar also fell against the yen, trading at 77.92 yen
, down 0.3 percent, according to Reuters data.
The Munich-based Ifo think tank said its business climate
index, based on a monthly survey of some 7,000 firms, fell to
101.4 in September from 102.3 in August. A Reuters poll of 45
economists had forecast a slight rise to 102.5.
"The euro has fallen after the German Ifo numbers, but this
has to be taken in the context as part of the survey was done
before the German constitutional court ruling," said Chris
Walker, currency strategist at UBS.
Germany's constitutional court gave its approval on Sept. 12
for the euro zone's bailout fund, boosting the euro. Ifo
economist Klaus Wohlrabe said 50 percent of the Ifo survey's
responses were taken before the court's decision.

"In the near term, what happens to the euro is very much
contingent on when Spain applies for a bailout. So far they are
resisting," Walker added.
Madrid is expected to present its draft budget plan for 2013
later this week and announce new structural reforms, while the
results of stress tests on the wobbly Spanish banking sector are
also due. These could set the stage for a full-scale bailout.
However, Economy Minister Luis de Guindos said on Saturday
that Spain will not rush to seek external aid to finance its
debt, and EU officials said they did not expect Prime Minister
Mariano Rajoy to seek an assistance program before a regional
election in his native Galicia on Oct. 21.
Adding to pressure for Spain is the risk of a downgrade of
its sovereign debt rating to junk status by ratings agency
Moody's, which some expect this week, as well as a 27.5 billion
euro refinancing hump at the end of next month.
Meanwhile, an EU/IMF report on whether Greece's debt is
manageable, originally expected next month, now looks set to be
delayed until after Nov. 6.

RESCUE FUND TALK
Spiegel magazine reported that the euro zone wanted to
leverage the rescue fund for a total capacity of more than 2
trillion euros.
Germany played down the talk, but acknowledged discussions
were under way in Brussels on giving the European Stability
Mechanism certain instruments to lure private investors.

Data on Friday from the U.S. derivatives watchdog CFTC
showed that speculators' net euro short positions shrank to
their lowest level since November, having fallen to just above
one-third of the record peak reached in June.
Risk aversion firmly favored the yen, but Japan might
intervene in the market should the yen gain further, traders
said. The Bank of Japan's easing last week is seen as paving the
way for such a move.