* Spain bailout request eyed, but uncertainty remains
* U.S. retail sales firm, boost risk appetite
* Yen undermined by BOJ easing speculation, Softbank deal
By Nia Williams
LONDON, Oct 16 The euro rose against the dollar
on Tuesday, helped by persistent talk Spain may soon ask for a
bailout and tentative signs of improving confidence in the
Solid U.S. retail sales and company results that eased
global economic concerns also boosted demand for perceived
riskier currencies, and helped the dollar climb to a one-month
high against the safe haven yen.
A German ZEW survey showed analyst and investor sentiment
rose for the second month in a row in October, although it
remained in negative territory.
The survey helped lift the euro to a session high, although
the single currency remained well within its recent tight range
roughly between $1.3070 and $1.28.
"There is a feeling of stalemate in the sense that the
market is waiting for Spain to ask for a bailout ... There is a
good chance that the euro could stay rangebound for a while,"
said Jane Foley, senior currency strategist at Rabobank.
The euro rose 0.5 percent on the day to $1.3011, its
highest level in a week, though traders said it may struggle to
make a sustained break above $1.30 given reported demand to sell
it around that level. A break above $1.3072 would target the
mid-September high of $1.31729.
The euro also rose 0.8 percent to 102.685 yen.
A Spanish aid request would prompt the European Central Bank
to start buying Spanish bonds to bring down its borrowing costs.
Analysts and traders say this would buoy the euro, though
uncertainty remains over when Spain will make a move.
Although hopes that Spain could ask for financial aid at a
European Union summit later this week have dimmed, euro zone
officials said it may do so next month. The request would
probably be dealt with alongside a revised loan programme for
Greece and a bailout for Cyprus.
"I am still bullish on euro/dollar, the next stage will be
Spain to ask for the bailout and that will boost the euro," said
Daragh Maher, currency strategist at HSBC. He forecast the euro
to rise to $1.35 by year-end.
Uncertainty over Greece's discussions with its international
lenders may limit gains for the euro, however.
Prime Minister Antonis Samaras said on Monday that Greece
will conclude the talks to continue receiving the bailout funds
it needs but officials said the talks would most likely not be
finished by Thursday's EU summit.
Upbeat U.S. economic data and earnings from banking
heavyweight Citigroup helped lift the dollar to 78.94 yen
, its strongest since Sept. 19. Speculation of more easing
from the Bank of Japan also weighed on the Japanese currency.
"There seems to be pressure piling on the Bank of Japan to
take action later this month. People are expecting more stimulus
from the BOJ," said Katsunori Kitakura, associate general
manager of market making at Sumitomo Mitsui Trust Bank in Tokyo,
referring to the bank's policy meeting on Oct. 30.
The rise in U.S. retail sales in September followed solid
sales in August and pointed to resilient U.S. domestic demand
despite worries about slowing global growth.
Although many traders expect the dollar's 77-79 yen trading
range to persist, a substantial break above its Ichimoku cloud
top, which now lies at 78.90, could be seen as one of the
strongest bullish signs for the pair in many months.
Japanese mobile operator Softbank's $20 billion purchase of
U.S. third-largest wireless company Sprint Nextel, the
largest foreign acquisition ever by a Japanese firm, has also
encouraged dollar buying against the yen.
But the yen could be resilient if worries over global growth
strengthen. The Japanese currency tends to rise in times of
economic stress due to Japan's net creditor status.
(Additional reporting by Philip Baillie and Jessica
Mortimer/editing by Chris Pizzey, London MPG Desk, +44 (0)207