* Euro rises to 2-week highs vs yen, sterling, Swiss franc
* Yen undermined by speculation of more BOJ easing
* Euro gains versus dollar but still stuck in range
* ECB seen leaving rates unchanged, Spain in focus
By Jessica Mortimer
LONDON, Oct 4 The euro rose on Thursday, hitting
two-week highs against the Japanese yen, the British pound and
the Swiss franc before a European Central Bank policy meeting
where rates are expected to be left on hold.
The yen was broadly weaker, dropping to a two-week low
versus the dollar on wariness in case the Bank of Japan
surprises on Friday by easing policy.
The euro rose as much as 0.5 percent to 101.82 yen on
trading platform EBS, its strongest since Sept. 21, while the
dollar hit 78.72 yen.
Market players were also cautious before the release of key
U.S. jobs data on Friday, with analysts saying a stronger number
may boost appetite for risk, helping the euro and weighing
broadly on the safe-haven dollar.
"For the next 24 hours going into the BOJ meeting the yen is
the weak link, while people are hesitant to put on long dollar
positions ahead of U.S. non-farm payrolls data," said Niels
Christensen, currency strategist at Nordea in Copenhagen.
Expectations that Spain will soon apply for aid, triggering
the ECB's bond-buying plan under which it would buy bonds to
bring down Spain's borrowing costs, kept investors wary of
selling the euro.
But it is uncertain when Spain will make the move and this
has limited gains for the single currency.
The euro was up 0.3 percent against the dollar at
$1.2942, staying comfortably above Monday's low of $1.28035 and
the 200-day moving average at $1.2823.
It also held below this week's peak at $1.2968 and the
mid-September high of $1.31729.
"Euro/dollar has been in a very tight range since early last
week ... It's very much wait-and-see with people looking to see
whether the ECB and the payrolls report will be the trigger for
more momentum in euro/dollar in either direction," Nordea's
It would need a move above $1.32 to trigger another round of
short-covering in the euro, he added.
The ECB is expected to hold interest rates when it meets on
Thursday to allow time for new details on the health of the euro
zone economy and for Spain to ask for aid.
Also in focus on Thursday was a Spanish debt auction, where
Madrid raised close to 4 billion euros ($5.2 billion) by selling
three bonds maturing in 2014, 2015 and 2017. Yields fell from
the previous auction though traders said not enough to boost the
The euro rose to two week highs against the Swiss franc
of 1.2136 francs on EBS and against sterling
of 80.385 pence.
The dollar was broadly lower, with its index down
0.25 percent at 79.752. Data on Wednesday showed a
larger-than-expected increase in private-sector jobs
while investors also awaited the minutes of the
Fed's last policy meeting, where it decided on a new bond buying
The BOJ, which only last month boosted its asset-buying
programme, has been under intense political pressure to offer
more stimulus to spur growth and weaken the yen.
Analysts generally expect the BOJ to stand pat at the Oct.
4-5 meeting to gauge the effects of its latest easing, but
pressure to ease further is expected to continue ahead of its
next policy meeting on Oct 30.
Japan's new Economics Minister Seiji Maehara will likely
attend the Bank of Japan's policy-setting meeting on Friday, a
source familiar with the matter said.
"It may take a while before the BOJ will actually do
something. Still, market players are speculating about more
easing and you have to consider which side of position you
should take under such conditions," said Katsunori Kitakura,
associate general manager of market making at Sumitomo Mitsui
Trust Bank in Tokyo.
The Australian dollar fell to a 3 1/2-month low against the
euro and was steady versus the dollar at $1.0211m
having earlier dropped to a one-month low of $1.0182.
Data showed Australian retail sales edged up only marginally
in August, adding to the case for further cuts in interest