Euro Retreats With Spain Rescue Details Elusive
The euro retreated from the top of its recent trading range against the dollar on Friday as a perceived lack of progress on a Spanish bailout request curbed demand for the single currency.
Expectations Spain will seek a bailout helped the euro rally to a one-month high this week, but uncertainty about when such a request might come has made investors wary of driving the single currency much higher.
The euro was close to flat on the day at $1.3064, having hit a one-month high of $1.3140 on Wednesday, and holding within the $1.28 to $1.3170 range it has traded in since mid-September.
Traders reported bids around $1.3000-1.3020 that could provide support.
"We are missing the decisive news that might push us out of this range. It is most likely going to be some political news like a move from Spain," said Ulrich Leuchtmann, head of FX research at Commerzbank.
European leaders moved closer to establishing a single euro zone banking supervisor at a summit on Thursday, but talked little about the problems facing debt-ridden Spain and Greece.
A bailout request from Spain would enable the European Central Bank to buy Spanish bonds and drive down Madrid's borrowing costs. That would probably increase investor appetite for perceived riskier currencies against the safe-haven dollar, such as the euro.
The single currency was on track to end the week up nearly 1 percent against the dollar and almost 2 percent higher versus the yen . Investors have further unwound bets against the euro that they took on the risk the currency bloc could break up.
But strategists said many remained cautious and were looking to profit by selling the euro near the top of the range.
"Our survey of euro/dollar positioning suggests a market betting on a wide range trading environment strategically, while tactically looking to sell euro/dollar on rallies," Societe Generale strategist Sebastien Galy wrote in a client note.
Other analysts said the euro's rally since late September was overdone given the bloc weak economic outlook. Makoto Noji, senior strategist at SMBC Nikko Securities, reckoned the euro's fair value was below $1.30.
Yen Weakens
Easing worries over the euro zone and some recent strong U.S. data has helped keep the yennear five-month lows versus the euro and a two-month trough against the dollar.
The dollar traded flat at 79.34 yen , near a two-month high of 79.47 yen set on Thursday, while the euro fetched 103.67 yen, near Thursday's five-month high of 104.145 yen.
Speculators have recently sold the yen on expectations the Bank of Japan will take another easing step at its policy meeting on Oct. 30, following up on its easing last month.
However, the dollar's advance is likely to slow as Japanese exporters are waiting to sell, and immediate resistance is seen at 79.66 yen, its August peak.
The Australian dollar was steady at $1.0365, off a three-week high of $1.0415 hit on Thursday.
