* Spanish budget in focus, may lead to aid request
* Euro near two-week lows vs dollar and yen
* Support for euro seen at 200-day moving average near
By Nia Williams
LONDON, Sept 27 The euro traded close to a
two-week low against the dollar on Thursday as investors awaited
a draft budget from Spain that could pave the way for the
country to request an international bailout.
Uncertainty about when Spain will request a rescue programme
has weighed on the euro in recent sessions, with the single
currency coming under pressure as Spanish 10-year bond yields
hovered near 6 percent.
Spain is expected to present its 2013 budget draft later on
Thursday. A credible budget along with comprehensive structural
reforms could build the foundation for meeting conditions for a
Spanish aid package and intervention by the European Central
Bank in the bond market, analysts said.
The euro was close to flat at $1.2862, just above a
two-week low of $1.2835 set the previous day. The euro has
support at the 200-day moving average near $1.2826 and around
$1.2740, the 38.2 percent retracement of the July to September
"All eyes have been on Spain for the last week or so. We
have had a big shift in euro positioning recently so going into
the budget investors are probably positioned fairly neutral,"
said Michel Sneyd, FX strategist at BNP Paribas.
Adding to concerns over Spain, the indebted Castilla La
Mancha region may seek 800 million euros ($1 billion) in
emergency funding from the central government, regional and
party sources said on Thursday.
Most strategists said the euro was likely to appreciate if
and when Spain requests a bailout to trigger ECB bond-buying,
although gains would be curbed by concerns about Greece.
"The reaction to the Spanish budget and whether Spain is
going for a bailout or not in the near term along with the clear
and present danger that Greece presents will be factors that
will keep gains limited," said Simon Derrick, head of currency
research at Bank of New York Mellon.
Demonstrators clashed with police in Athens and Madrid this
week in protest over new austerity measures.
Greece's international lenders are at loggerheads over how
to respond to its debt crisis, threatening more trouble for the
euro in the coming weeks.
A Moody's review of Spain's ratings is also expected this
week. A cut could take the country below investment grade and
put further pressure on policymakers.
CHINA EASING TALK
Talk that Chinese authorities might take steps to prop up
the country's stock markets had earlier bolstered riskier
currencies like the Australian dollar and lent some support to
the euro against the safe-haven dollar and Japanese yen.
The country's securities regulator holds a regular meeting
The growth-linked Australian dollar rose 0.4
percent against the U.S. dollar to $1.0410, while the New
Zealand dollar climbed 0.6 percent to $0.8283.
The yen inched higher against the dollar to 77.69
yen. It remains within sight of a seven-month high of 77.13 hit
on Sept. 13, the day the Federal Reserve announced a new round
of monetary stimulus.
The euro also dipped against the yen, trading at 99.89 yen
after having hit a two-week low of 99.71 yen on