June 5, 2012 / 4:21 PM / 8 years ago

FOREX-Euro falls on Spain warning, G7 disappointment

* Euro falls, erasing earlier gains as Spain worries grow
    * Spain's Montoro says financial markets closing to Spain
    * Market awaits any clues from G7 conference call

    NEW YORK, June 5 (Reuters) - The euro slipped on Tuesday as
Spain's treasury minister said high borrowing costs meant credit
markets were closing to Spain and investors received little
comfort from an emergency conference call of Group of Seven
finance chiefs.	
    The dollar climbed to a fresh session high against the yen
after Japan's Finance Minister Jun Azumi said a strong yen is
damaging Japan's economy.    	
    But it was the G7 call that disappointed investors when a
Japanese Ministry of Finance official said there would be no G7
statement to follow the teleconference..  	
    The G7 ministers and central bankers held the call to
discuss the euro zone's worsening debt crisis, although the
chances of a significant breakthrough had always looked slim.
    "None of these meetings have produced anything meaningful,
and with debt burdens piling up across the globe, I remain
highly doubtful that anything substantive will be implemented,
and anything that falls short of fiscal union in Europe will
allow the crisis to proliferate," said Christopher Vecchio,
currency analyst at DailyFX in New York.	
    In a later statement, the U.S. Treasury Department said G7
finance ministers discussed progress towards a financial and
fiscal union in Europe. [ID:nW1E8EM02J}.	
    After Tuesday's G7 finance ministers conference call,
investors are now waiting for the ECB policy meeting on
Wednesday, Federal Reserve chairman Bernanke's testimony to the
U.S. Congress on Thursday, and the Greek elections and G20
meeting in Mexico which are both on the weekend of June 17.	
    The G7 talks boosted the euro earlier but it fell after
Spain's Treasury Minister Cristobal Montoro 
highlighted the funding problems facing the euro zone's fourth
largest economy. Investors worried that the country may have to
seek external aid.	
    The euro was further pressured when German regulator Bafin
on Tuesday said moves to create a banking union in Europe were
premature. [ID:nL5E8H54VQ}.  	
   The single currency was last down 0.4 percent at
$1.2442 after falling to a session low of $1.2409, more than a
cent below an earlier one-week high. On Friday, it had hit a
two-year low of $1.2286, using Reuters data.	
    "People will be happy to sell into moves above $1.25," said
Anders Soderberg, currency strategist at SEB in Stockholm.	
    The euro has recovered since weak U.S. jobs data on Friday
weighed on the dollar, feeding speculation about the prospect of
another bout of monetary easing in the United States. But
Soderberg said this was merely "a short-term break in what now
seems to be a well-established downtrend".	
    Investors also are worried about the risk that a Greek
election in two weeks could push Athens out of the euro.	
    The depths of the problems facing the euro zone were
underlined by a purchasing managers' survey showing the bloc's
private sector economy shrank at the fastest pace in nearly
three years in May. Euro zone retail sales and German industrial
orders were also worse than forecast.
    It also erased the euro's earlier gains against the yen and
the euro zone common currency was last down 0.1 percent at 97.81
yen. This still left it comfortably above Friday's low
of 95.57 yen, using Reuters data, the lowest since December
    Against sterling, the euro fell 0.3 percent to 81.00 pence
, off an earlier one-month high of 81.41 pence.	
    The G7 talks prompted some market players to speculate that
the European Central Bank could opt for some form of further
monetary stimulus when it meets on Wednesday.	
    International Monetary Fund Managing Director Christine
Lagarde said in an interview with a Swedish newspaper that the
ECB had room for another interest rate cut. 	
    There has been some talk of a cut, although a recent Reuters
poll showed only 11 out of 73 analysts polled expected a move
this month. 	
    In a sign of increasing concern about the impact of the euro
zone debt crisis, the Reserve Bank of Australia cut interest
rates by 25 basis points on Tuesday. 	
    The Australian dollar was little changed at $0.9723,
as the rate cut was less than the 50 basis points some had
    Traders will be looking to testimony by U.S. Federal Reserve
Chairman Ben Bernanke on Thursday for any hints on the
possibility of more quantitative easing. 	
    The dollar was up 0.3 percent at 78.57 yen, almost a full
yen from Friday's 3-1/2-month low of 77.65 yen, using Reuters
data. Investors were still wary however, about the possibility
of Japanese authorities stepping in to stem the yen's rise.
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