* Euro falls, stop-loss orders triggered below $1.33
* Italy auction solid but market nervous on Spain
* Yen firms as equity markets slide
By Luciana Lopez
NEW YORK, March 29 The euro slid against the
dollar and the yen on Thursday as investors fretted that a
Spanish budget due on Friday could show the euro zone nation
with little recourse to dig its way out its debt dilemma.
The yen also benefited from flows ahead of the close of
Japan's fiscal year on March 31, with data showing
weaker-than-expected U.S. initial jobless claims also adding to
the market's nervousness.
In Spain, workers slowed public transport to a crawl and
disrupted factories to protest Prime Minister Mariano Rajoy's
sweeping reforms a day before a new round of budget cuts.
That budget "is a very dicey game," said Karl Schamotta,
senior markets strategist with Western Union Business Solutions.
An austere document could spur relief in bond markets,
"however, the reality is that that will slow growth and cause
problems for them down the road," he said. "If the budget is on
the softer side, we could see bond markets capitulating and
participants concerned that we are not seeing enough resolve."
For trading, that means volatility ahead, Schamotta said.
Italian and Spanish yields were already rising on Thursday
despite a broadly successful sale of Italian bonds, as investors
switched into low-risk German debt.
The euro fell 0.25 percent to $1.3281 and touched its lowest
since the start of the week.
Traders said automatic stop-loss sell orders were triggered
on the euro's break below $1.33 after the European Commission's
economic sentiment index dipped by 0.1 percent, with sentiment
in industry worsening markedly.
Analysts said the euro was unlikely to break out of its
recent range of roughly $1.30 to $1.35, with market players
expecting a euro zone finance ministers' meeting to approve
bolstering the region's rescue fund on Friday.
"Given we are below $1.33 this is certainly a
psychologically important mark, which may be the beginning of a
more sustained down move," said Caroline Hecht, currency
strategist at Commerzbank.
"If euro zone finance ministers decide the rescue package
will be enlarged that will be calming for the market but we
expect the risk premia on peripheral countries' yields to remain
Expectations over the size of the rescue fund have been
tempered by European Central Bank governing council member Jens
Weidmann, who is also the Bundesbank chief, who warned that
raising the firewall around stricken euro zone members would
only buy time.
YEN FIRMS BROADLY
The euro fell 1.11 percent on the day to 109.09 yen
, with the Japanese currency gaining broadly on demand
linked to the end of Japan's financial year and as European and
U.S. equity markets followed Asian bourses into negative
The last day for spot trading in the business year to March
31 was on Wednesday, but real-money flows from Tokyo kept major
currencies under pressure against the yen, with exporters
selling the dollar in large amounts, market players said.
U.S. data also added to safe-haven demand. While new jobless
claims fell last week, the number was higher than expected, and
the previous week's figure was revised higher.
The dollar fell 0.87 percent to 82.13 yen and touched
a near three-week low, triggering reported stop-loss orders on
the break of 82.35/40. But many strategists said the dollar
should reassert itself against the yen as long as upcoming U.S.
data does not bear out a recent rise in concerns about growth.
"There's definitely a lot of month-end and quarter-end
rebalancing, but the bigger story we are seeing is some bond
buying and equity selling in the last 24 hours," said Geoff
Kendrick, currency strategist at Nomura.
"But assuming U.S. economic numbers next week are okay we
could see U.S. yields back up to the top of their recent range
and that could be very dollar/yen supportive."