* Spanish banks' reliance on ECB stokes fears on debt crisis
* Disappointing China GDP weighs on risk sentiment
* Euro off for second week against dollar, yen
By Luciana Lopez
NEW YORK, April 13 Higher Spanish borrowing
costs dragged the euro down o n F riday, pulling the single
currency to a second straight weekly loss against the dollar and
the yen as the European debt crisis and slower-than-expected
Chinese growth worried investors.
News that Spain's banks are virtually locked out of credit
markets and relied heavily on cheap loans from the European
Central Bank in March spooked investors, who then drove the cost
of credit default swaps on Spanish debt to a record high.
The Spanish debt concerns stoked worries from earlier in the
session, when data showed China's economy grew less than
expected in the first quarter.
"The euro zone situation is slowly flaring up again, and
that can have some people second-guessing how many euros they
want to hold," said Sean Incremona, an economist at 4cast Ltd in
"In the bigger picture, price action this week has been
pretty inconsequential," he added. "We're pretty close to where
it left off last week after the payroll action," when U.S. jobs
data disappointed and the dollar sold off on views the U.S.
Federal Reserve could ease policy further.
The single currency has been mostly range bound in recent
weeks as investors look for a reason for large moves.
The euro fell 0.8 percent to $1.3080 on Friday,
eroding what had previously been a slight advance for the week
versus the dollar. The single currency was more recently off
0.16 percent against the greenback for the week.
Against the yen the euro was off 0.67 percent at 105.90 yen
, for a fall of 0.815 percent this week.
The dollar's gains were broad-based, with the greenback
rising 0.91 percent against the traditional safe-haven Swiss
franc to 0.9192 francs. Against the yen, the dollar was
up 0.09 percent at 80.95 yen.
"We are seeing the traditional reaction in that stocks are
selling off, core bond markets are rallying, the dollar is
rallying and commodities are getting hit," said George Davis,
chief technical analyst at RBC Capital Markets in Toronto.
Investors could stay more pessimistic over the next few
weeks, he said.
Uncertainty about the euro, however, has fallen as reflected
in the options market, with three-month risk reversals in the
euro/dollar still biased for euro puts, trading at -2.075 vols
on Thu rsday, but improving from -3.5 vols in
The Australian dollar, which reacts strongly to Chinese data
because Australia's commodity-driver economy relies heavily on
Chinese demand, fell to as low as US$1.0352.
The Aussie had gained 1.2 percent on Thursday on a
surprisingly strong local jobs report and solid bank lending
data from China.
"We view yesterday's strong Australian employment and
Chinese loan data as more important than the overnight Chinese
Q1 GDP release and hence see the overnight sell-off in AUD as
providing good levels to go long," Nomura analyst Geoff Kendrick
said in a note.