FOREX-Euro down for 2nd straight week as Spain caution persists
* Euro seen weighed by possible Moody's review on Spain debt * Uncertainty over Spain aid request remains * Spain stress test shows banks need extra 59.3 bln euros * Euro faces chart resistance at $1.2960 By Gertrude Chavez-Dreyfuss NEW YORK, Sept 28 (Reuters) - The euro fell against the dollar on Friday, declining for a second straight week, as uncertainty persisted about Spain's bailout prospects despite a generally positive audit report on the country's struggling banks. An independent audit from consultant Oliver Wyman released on Friday showed that Spain's troubled banking industry would need 59.3 billion euros more capital to cope with a serious economic downturn. Spain, however, said it would only ask for 40 billion euros in European aid for its banks. European governments have allotted a 100 billion-euro credit line for Spain's banking sector. The audit report was viewed as positive for Spain and the euro because the final figure the country's banking capital needs was largely in line with market expectations, removing another layer of uncertainty. The euro did trim its losses versus the dollar following the news on the Spanish banking capital requirements but the general stance on the euro zone common currency remained cautious. "There's still a lot of questions about Spain, mainly related to whether or not it would seek a bailout," said Brian Kim, currency strategist at RBS Securities in Stamford, Connecticut. "Overall there are a lot of implementation risks in terms of all the measures committed by European policymakers to deal with the euro zone crisis." In early afternoon trading, the euro was last down 0.4 percent at $1.2859, not far from Thursday's two-week low of $1.2828. The euro faces resistance at $1.2960, the 38.2 percent retracement of its Sept. 17-27 slide, while the 200-day moving average around $1.2825 is expected to serve as support. The single currency was down 0.9 percent this week against the dollar, after losses of more than 1.0 percent the previous week. It was the largest two-week loss for the euro since mid-July. The euro, however, at current prices fared better against the greenback in September, appreciating 1.7 percent, its best performance since the first quarter this year. The common currency's positive performance was largely a reflection of diminished debt crisis fears resulting from assurances made during the summer by European Central Bank President Mario Draghi that the ECB will do whatever it takes to preserve the euro. Also helping the euro this quarter was the ECB's announcement this month that it would buy bonds from heavily indebted countries. Analysts, however, said the euro's gains may be limited. Longer term, concerns Spain would be unable to implement its budget plans and bring down its deficit could weigh on the common currency. Madrid on Thursday announced a detailed plan for economic reforms and a budget based mainly on spending cuts rather than tax measures, in what many analysts saw as an effort to pre-empt the conditions for a bailout. The Spanish budget goes to parliament on Saturday and debates could last weeks. Spain's 17 autonomous regions still must present budgets and find an additional five billion euros in adjustments to meet overall public deficit reduction goals. Craig Erlam, market analyst at Alpari Ltd in London, believes a bailout request from Spain seemed inevitable. That request from Spain is a precondition for the ECB to start buying its debt to bring down its borrowing costs. Analysts and traders said this would lift the euro, but Spain has appeared reluctant to take that step. MORE HURDLES Moody's rating agency is due to review Spain's sovereign rating by the end of this month and may downgrade it to junk status. On Thursday, ratings agency Egan-Jones cut Spain's sovereign rating further into junk status. In addition, much of the euro zone is mired in a recession, which should keep ECB monetary policy accommodative for quite some time. A rate cut may be in the pipeline as well, perhaps as soon as its monthly policy meeting next Thursday, analysts said. In other currencies, the yen was broadly weaker. It fell against the dollar on Friday, after rising for seven straight sessions. The dollar last traded at 78.08 yen, up 0.6 percent on the day, its largest one-day gain in two weeks. The euro also rose 0.1 percent versus the yen to 100.35 yen .
- U.S. Mega Millions lottery up to $400 million, 2nd-biggest ever
- Uruguay becomes first country to legalize marijuana trade
- Pope Francis named Time's Person of the Year
- Thousands of South Africans line up to see Mandela lie in state |
- China bitcoin arbitrage ends as traders work around capital controls