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FOREX-Euro steady as investors eye Spanish aid request
October 15, 2012 / 8:40 AM / 5 years ago

FOREX-Euro steady as investors eye Spanish aid request

* Euro’s climbs from lows on real money buying

* China export rebound underpins commodity currencies

* Dollar index slips from high

By Anirban Nag

LONDON, Oct 15 (Reuters) - The euro was steady on Monday as traders awaited clarity on when Spain would request a bailout, with little scope of solid news at an European Union summit later this week.

That is likely to check any substantial gains in the euro in the near term. Expectations that the single currency would rally once Spain seeks a rescue package, however, keeping investors from betting against it.

The euro was flat at $1.2945, recovering from a low of $1.2891 on buying by real money investors. Uncertainty about when Madrid would seek financial aid has kept the euro trapped in a range roughly between $1.2800 and $1.3100 since mid-September with option structures below $1.2800 cited.

Euro zone officials said Spain could ask for financial aid from the euro zone next month and if it does the request would likely be dealt with alongside a revised loan programme for Greece and a bailout for Cyprus in one big package.

“Any policy announcement keeps getting pushed back and a lack of political action is keeping the euro pinned down,” said Adam Myers, senior currency strategist at Credit Agricole. “The euro remains a sell on rallies because the ECB’s decision to buy unlimited government bonds is only a palliative.”

The ECB has said it will buy bonds after Spain has applied for a bailout.

European Union leaders hold a summit this week with the focus on Spain and Greece. While Greek Prime Minister Antonis Samaras has said Greece is likely to agree to a new austerity package with international lenders at the meeting, very little like a formal request by Madrid for aid is expected.

The euro was 0.2 percent higher at 101.75 yen, with stops cited above 101.20 yen.


Data over the weekend showed China’s exports grew at roughly twice the rate expected in September, while imports also improved, raising hopes that measures to spur growth in the world’s second biggest economy are working.

“The better-than-expected upswing in Chinese exports follows similar outcomes for Taiwan and Korea and may be consistent with a bottoming in global manufacturing PMIs in suggesting a possible stabilisation or improvement in global growth,” said Shane Oliver, head of investment strategy at AMP Capital.

That helped demand for riskier assets like stocks and commodity currencies like the Australian dollar. The Aussie rose 0.1 percent on the day to $1.0235.

The U.S. dollar, which tends to be sold off when investor sentiment picks up, slipped from highs. The dollar index, a gauge of the dollar’s value against a basket of major currencies, was flat at 79.735, off a high of 79.687.

The dollar edged up 0.2 percent against the yen to 78.57 yen .

A trader for a major Japanese bank in Singapore said the dollar drew some support from market speculation related to recent media reports that Japanese wireless service provider Softbank Corp was looking to buy about 70 percent of U.S. carrier Sprint Nextel Corp.

A source familiar with the matter said Softbank is near a $20 billion deal to acquire control of Sprint.

Ever since reports of the possible deal first emerged last week, there has been market talk that it could generate dollar-buying, yen-selling flows in the foreign exchange market, especially given the size of the deal.

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