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FOREX-Euro higher vs dollar on the day, lower for the week
* Traders await clarity on Spanish bailout
* Potential for euro to rally if Madrid requests aid
* Yen capped after U.S. jobless claims data, Softbank news
NEW YORK, Oct 12 (Reuters) - The euro rose against the dollar and yen on Friday, but remained within its recent trading range as investors awaited clarity on when and whether heavily indebted Spain would formally request a bailout to shore up its battered finances.
Buying by sovereign investors lifted the single currency earlier in global trade, but the euro looked likely to struggle for traction until answers emerged over a potential Spanish aid request.
A potential bailout request is widely seen as a positive for the euro as it would remove another layer of uncertainty in financial markets and activate the European Central Bank's bond-buying program aimed at lowering borrowing costs for troubled euro zone economies.
The Spanish economy minister said on Friday a European bond-buying plan was fully ready for use and that there was no political resistance to a bailout request from within the euro zone.
"The latest developments do suggest that the Spanish authorities continue contemplating the possibility," said Vassili Serebriakov, currency strategist at Wells Fargo in New York.
"While the timing remains highly uncertain, we still believe an aid request is more likely than not," he said.
The euro was last trading at $1.2952, up 0.2 percent on the day, but down 0.6 percent on the week. It has traded in a relatively tight range since mid-September, roughly between $1.28 and $1.3170.
The euro hit a 10-day low at $1.2824 on Thursday, but found firm support at its 200-day moving average at $1.2823.
Some US$4.7 billion in euros changed hands on Friday using Reuters Dealing, compared with US$5.7 billion on Thursday.
It recovered after the International Monetary Fund said Europe's heavily indebted countries should be given more time to narrow their deficits.
Data showing output at euro zone factories grew much more than expected in August added to euro's gains.
Ian Stannard, head of European FX strategy at Morgan Stanley in London, said he expected a stronger euro in coming months given the likely boost from a Spanish aid request.
"The euro is positioned to extend its rebound, and we expect a move back up to September levels from $1.3170 to $1.34 for the year-end," he said.
Against the yen, the euro rose 0.3 percent to 101.55 yen . The dollar hit a high of 78.53 yen, recovering from Thursday's 10-day low against the Japanese currency. It was last up 0.1 percent at 78.40 yen for the day though down 0.3 percent for the week.
News that Japan wireless service provider Softbank Corp may buy a majority stake in Sprint Nextel, in a deal potentially worth at least 1 trillion yen ($12.74 billion), helped lift the dollar against the Japanese yen, traders said.
Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo, said the potential Softbank deal was so large that currency markets could be tapped for part of the financing.
The dollar showed little reaction to U.S. data showing consumer sentiment unexpectedly rose in October to its highest in five years, while producer prices climbed more than expected in September.
The Australian dollar dipped 0.3 percent to $1.0232, retreating from the previous session's one-week high.
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