Dollar gains, euro dips on earnings, growth worries

LONDON Wed Oct 10, 2012 4:31am EDT

1 of 2. Euro notes are pictured at a bank in this photo illustration taken in Seoul June 18, 2012.

Credit: Reuters/Lee Jae-Won

LONDON (Reuters) - The dollar held near a one-month high versus its currency basket while the euro fell on Wednesday, as concerns about company earnings being hit by weak global growth hurt equities and drove investors into safer currencies.

Concerns over when Spain may apply for a bailout and downbeat comments from European Central Bank President Mario Draghi on the euro zone economy also weighed on the euro, which dropped to 10-day lows against the dollar and the yen.

The euro was down 0.1 percent at $1.2867, having earlier hit a low of $1.2835 on the EBS trading platform. It also hit a low against the yen of 100.43 yen.

The dollar index .DXY was up 0.1 percent at 80.024, having earlier risen to 80.186, its strongest since September 11.

"Euro/dollar is lower on a mixture of risk aversion in equity markets, which is helping the dollar, and on the remarks from Draghi," said Niels Christensen, currency strategist at Nordea in Copenhagen.

Draghi said the region faced a long road to recovery, despite the ECB's plan to buy the bonds of indebted euro zone countries, and that there was no alternative to budget austerity.

The euro has slipped since hitting a high of $1.3072 on Friday but remains above chart support at its 200-day moving average of $1.2822 and the October 1 low of $1.2803. A break below there would leave it vulnerable to more falls.

GLOBAL GROWTH

"The big question is whether euro/dollar can break below $1.28, which could support momentum to the downside. But this will be difficult unless we get very negative equity markets," Nordea's Christensen said.

European shares .FTEU3 were flat, having opened lower. Shares on Wall Street dropped overnight as weak global growth sparked concerns about the outlook for large companies as the earnings season gets underway. .EU .N

"Markets overnight turned against risk and whether that will be reversed will depend on how equities react to U.S. third-quarter earnings," said Junya Tanase, chief FX strategist at JPMorgan Chase in Tokyo.

But even if equities turn higher, uncertainty about the euro zone was expected to weigh on the euro and limit any gains.

The International Monetary Fund on Wednesday urged European policymakers to deepen the financial and fiscal ties within the euro area with some urgency.

Spain must request a bailout for the ECB to start buying its bonds, while investors fretted about whether Greece will agree with its international lenders on terms for the next tranche of funds needed to keep the country afloat.

German Chancellor Angela Merkel on Tuesday reaffirmed Berlin's commitment to keep the debt-crippled nation inside Europe's single currency, but offered no concrete relief as thousands of protestors gathered.

(Additional reporting by Chikako Mogi and Hideyuki Sano in Tokyo; Editing by David Holmes)

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