* Euro rises to session-high after strong Spanish bond
* Gains limited ahead of ECB meeting on Thursday
* ECB seen holding rates steady
* BOJ easing expectations keep pressure on yen
By Anooja Debnath
LONDON, Jan 10 The euro rose against the dollar
and the yen on Thursday after strong demand at a Spanish bond
auction, but further gains were likely to be limited before a
European Central Bank interest rate decision.
The single currency rose to a session high against the
dollar and the yen after Spain's Treasury sold 5.8 billion euros
of bonds, exceeding its target range of 4 billion-5 billion
The euro rose to $1.31065, from $1.3085 before the
auction results, and was up 0.3 percent on the day. Traders
reported stop-loss buy orders at $1.3110 and $1.3115.
Against the yen, the euro hit a session-high of
115.50, close to an 18-month high of 115.995 hit in early
January. It was last up 0.5 percent at 115.34 yen.
"The Spanish bond auction was better than expected and that
saw the euro rise," said Alexandre Dolci, FX strategist at BBVA.
"But the market is awaiting signals from the ECB over how
serious it is on delivering further near-term policy easing.
Depending on the rhetoric used in the press conference, the euro
is either going to hold the $1.31 ground or to slip back towards
While the ECB is widely expected to keep rates on hold when
it meets later on Thursday, some traders have positioned for a
risk of a rate cut.
ECB President Mario Draghi is scheduled to address a press
conference at 1330 GMT and investors will keep an eye for any
indications of future easing in monetary policy. If there are no
such hints, the euro could edge up.
Reported bids from Asian central banks at $1.3040, however,
were likely to limit any falls in the euro. Chart support was
expected near $1.3000 it's 50 and 55-day moving average.
"The euro has struggled to sustain any rallies past
$1.30-$1.40 in the past few weeks. With economic data out of the
euro zone not looking good, it is difficult to construct a
bullish story for the euro," said Peter Kinsella, currency
strategist at Commerzbank.
The dollar neared a 2-1/2-year high against the yen on
Thursday, with the Japanese currency looking susceptible to
further losses on increasing bets of easier policy by the Bank
The dollar was up 0.5 percent on the day at 88.30 yen
, not far from 88.48 yen hit on Friday, its highest level
since July 2010. The yen gave up most of its gains earlier this
"We can definitely see the trend of yen weakness continue,"
Commerzbank's Kinsella said.
"Data for China last night was very good and that was good
for risk in general and bad for safe-haven currencies, like the
yen, which weakened on the back of that. The BOJ increasing its
inflation target poses a further risk to the yen."
China's export growth showed a surprisingly sharp rebound in
December to a seven-month high, which saw growth-linked
currencies such as the Australian dollar hit a
three-week high against the dollar at $1.0568.
Traders reported strong demand for options betting on
further yen weakness, with one-month dollar/yen implied
volatility - a measure of expected price movement -
rising to its highest since March 2012.
One-month risk reversals showed demand to buy
yen puts - or bets on the yen falling - rising sharply to 0.95,
up from around 0.4 at the start of the week.
Yen moves will probably be volatile ahead of the BOJ's Jan.
21-22 policy meeting. The Japanese central bank is widely
expected to heed Prime Minister Shinzo Abe's call for adopting a
2 percent inflation target at its next policy meeting.