* Euro falls across the board, manages to stay off weekly
* Concerns about Italian political situation weighs on euro
* Focus on U.S. fiscal spending cuts threat on Friday
* Japan nominates Kuroda as next BOJ chief as expected
By Anooja Debnath
LONDON, Feb 28 The euro fell against the dollar
and yen on Thursday on lingering concerns about the
political crisis in Italy with investors and speculators seeing
little reason to buy the currency.
The euro had pared some of its losses earlier today after
the sharp sell-off this week when elections in Italy yielded no
clear winner, fuelling concerns it would not be able to push
through reforms and reigniting the debt crisis.
Analysts said the euro could show some resilience today and
trade above $1.3000 due to month-end demand, but it would be
unable to make any notable gains given the continuing political
The common currency was down 0.2 percent on the day at
$1.3109, having come near to an eight-week trough of
$1.3018 on Tuesday.
Hedge funds were cited as main sellers of the euro. Reported
options barriers ahead of $1.3160 and chart resistance at the
euro's 55-day moving average at $1.3295, could limit any gains.
"We have got a lot of Italian election uncertainty in the
next two to three weeks. There is going to be a lot of political
horse trading going into March 15, when the parliament
reconvenes, which doesn't sound like it is going to be good for
the euro," said Chris Turner, head of FX strategy at ING.
"We have a two-three week period where risk will more be off
than on, if we are in the euro/dollar range of 1.31-32 we would
prefer to sell at the top of the range really."
Analysts at Morgan Stanley now expect a test of the $1.30
area, with a move below that opening the risk of a decline
towards the $1.2660 area, "before a renewed euro recovery
Against the yen, the euro fell 0.3 percent on the day to
120.85 yen, still some way off a five-week low of
118.74 yen set on Monday.
U.S. SPENDING CUTS
Strategists said markets will refrain from making any
aggressive bets before the automatic spending cuts of $85
billion, which look increasingly likely to start on Friday with
U.S. President Barack Obama and Republican congressional leader
nowhere near a deal to avoid them.
"The U.S. fiscal cliff was always one of the scheduled event
risks of 2013 and it looks like the aggressive spending cuts are
likely to go through," Turner said.
"Right now people are looking at the benign outcome of the
cuts, but should there be any disappointing data later, like a
decline in consumer or business confidence then market reaction
will be magnified given the fiscal cliff backdrop."
Analysts said the dollar has so far however, weathered the
threat from sharp U.S. fiscal spending cuts, known as
"sequestration", which will likely cut U.S. growth by an
estimated 0.5 percent.
The dollar index was last at 81.64 not far from a
six-month high of 81.948 reached earlier in the week. On the
yen, the dollar was flat at 92.23 yen, still some way off
Monday low of 90.85 yen.
The yen showed little reaction after Japan's prime minister
nominated, as expected, Asian Development Bank President
Haruhiko Kuroda as BOJ governor and Kikuo Iwata, an academic, as
one of the two deputy governors.
The parliament is expected to approve the nominations,
clearing the way for the central bank to unveil fresh easing
steps in April, either at their first policy review on Apr 3-4,
or the following one on Apr. 26.
Expectations of more aggressive easing had prompted
investors to push the yen down to a 33-month low of 94.77 yen
per dollar on Monday, which marked a 16 percent fall since
"The market will need a bit of consolidation after such a
long period of one-way falls in the yen. But there's no denying
that the yen is in a downtrend in a longer term," said Hideki
Amikura, head of forex at Nomura Trust Bank.
"I expect the yen to drop more in April, as the market will
bet on fresh monetary easing at the BOJ's meeting at the end of