October 29, 2012 / 12:30 PM / in 5 years

FOREX-Euro falls on concerns over Greece, earnings

* Euro hits two week low vs yen, subdued against dollar
    * Hurricane Sandy to disrupt trade, dents risk sentiment

    By Philip Baillie
    LONDON, Oct 29 (Reuters) - The euro hit a two-week low
against the yen and fell versus the dollar on Monday, weighed by
concerns over Greece's next aid tranche and a trend of weak
earnings from European companies.
    The euro fell 0.4 percent to 102.53 yen, well
below a six-month peak of 104.59 yen reached on Oct. 23. Against
the dollar the euro was down 0.3 percent at $1.2894,
close to Friday's two-week low of $1.28825 with volumes likely
to taper in the coming hours.
    There was support for the euro at its 200-day moving average
of $1.2835 while offers were cited above $1.2910.
    Analysts expect the closure of stock markets in New York as
Hurricane Sandy approaches the U.S. East Coast to weigh on
equities, which would be negative for risk sentiment and boost
demand for safe-haven currencies such as the dollar and the yen.
 
    Markets also continue to fret over rescue measures for
Greece - which faces debt repayments in November - as well as
Spain.
    "Greece has come back onto the radar and along with Spain,
it poses a slight negative for the euro," said Jeremy Stretch,
head of currency strategy at CIBC World Markets.     
    In Athens, international lenders have refused to make more
concessions on changes to labour laws contested by a Greek
junior coalition partner, prolonging the impasse on a reforms
package and weighing on the euro. 
    Sentiment towards the currency is also unlikely to turn
positive unless Spain requests financial aid, traders said,
clearing the way for the European Central Bank to buy the
country's bonds.
    "We should see a very slight bias for the euro to drift
lower towards the 200-day moving average, it would be a big
surprise if it runs higher," said Chris Turner head of FX
strategy at ING.
    
    BOJ EASING
    Investors are also firmly fixed on Tuesday's meeting of the
Bank of Japan, where details of further monetary easing are
expected. With many speculators already running significant
short positions against the yen, more losses are viewed as
unlikely.
    The BOJ is expected to expand its asset purchases and may
continue to ease policy until 1 percent inflation is achieved.
 
    "Euro crosses were popular last week, we could be seeing an
unwinding of positions in those crosses including euro/yen on
expectations of easing from the BOJ tomorrow," said Turner.
    The dollar traded at 79.60 yen, flat on the day and
well below Friday's four-month high of 80.38 yen.  Turner said
there were likely stop-loss orders below 79.50 and dollar/yen
could trade down to 79.20.
    Data on Friday showed currency speculators had hiked their
bets against the yen, with the market posting a net short
position for the first time since May. 
    Some said the yen could weaken further no matter what the
BOJ does. If the central bank refrains from easing as strongly
as the market expects, futures and options data suggests the
yen's underlying soft trend will continue.
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