FOREX-Euro steadies after dropping on German data, Spain

Mon Sep 24, 2012 8:20pm EDT

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* Euro support seen at 200-day moving average around $1.2827

* Yen off highs but upward pressure from year-end repatriation remains

By Lisa Twaronite

TOKYO, Sept 25 (Reuters) - The euro steadied in early trade in Asia after falling to a more than one-week low against the dollar overnight as worries about Spain's debt persisted and weak German business data fanned fears of slowing growth.

The recently resurgent yen also gave up some ground against the dollar and euro, but market participants expected it to face continuous upward pressure this week from Japanese repatriation ahead of half-year book-closing.

A drop in German business sentiment to its lowest since early 2010 stoked concerns about a slowdown in the euro zone's largest economy, despite the European Central Bank's recently announced bond-buying plan.

Spain also remained in focus, as its government bond yields rose on concerns that the country is dragging its feet in requesting the international bailout that most market participants expect, through facilities such as the European Stability Mechanism (ESM).

"Market sentiment weakened amid signs of weak EU growth and worries about whether Spain will accept conditionality in exchange for ECB and ESM support," said strategists at Barclays in a note to clients on Tuesday.

"Growth worries are also spreading to other parts of the world, including China," they said.

Germany's Ifo think tank said its business climate index 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.

This week, Spain is expected to unveil new structural reforms and its draft budget plan for 2013. Investors also await results of stress tests on its banking sector.

A Moody's credit review of Spain is also expected this week, and the ratings agency could downgrade Spanish debt to junk status, although it has said it would welcome news of an aid request.

The euro recovered to $1.2940, after falling as low as $1.2891 on Monday, its weakest since Sept 13. The European unit reached what had been a four-month high of $1.3173 on Sept. 17.

Support was seen at its 200-day moving average, which is now around $1.2827.

Against the yen, the euro rose to 100.76 yen after slipping as low as 100.35 yen on Monday, its lowest level since Sept. 13.

The dollar bought 77.87 yen after retracing its Monday low of 77.83 yen, which was its weakest since Sept. 14.

The Australian dollar eased slightly to $1.0420, moving away from a six-month high of $1.0625 set on Sept 14.

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