* Poor Spanish bond auction spooks markets
* Fed’s less dovish stance weighs on risk currencies
* HSBC’s China services PMI report has little impact
By Antoni Slodkowski
TOKYO, April 5 (Reuters) – The euro hovered within shouting
distance of a three-week trough on the yen and the dollar on
Thursday after a poor Spanish bond auction reignited jitters
about the euro zone debt crisis, while commodity currencies were
a shade stronger after a sell-off.
The euro and risk currencies have been under pressure
against the dollar, which climbed broadly after Fed policy
meeting minutes released on Tuesday showed the central bank was
becoming less eager to print more money to bolster the economy.
The euro, which dropped nearly 1 percent to $1.3107
on Wednesday, last stood at $1.3150, up 0.1 percent on the day.
Immediate support for the currency loomed around $1.3094, the
76.4 percent retracement of the mid-to-late March rise.
“The weaker Spanish auctions on Wednesday provide a reminder
that markets are not convinced that peripheral stress has
completely abated,” BNP Paribas wrote in a client note.
Traders worry that the rally in debt of euro-zone peripheral
nations sparked by the European Central Bank’s two Long-Term
Refinancing Operations may be coming to a screeching halt.
The yield on Spain’s 10-year bond leaped to 5.7 percent, its
highest since January. This overshadowed a successful step back
into debt markets by similarly highly indebted
Portugal.
“Thus, with concerns over Spain peaking through and
political risk ever more apparent with the upcoming French and
Greek elections ahead, we reiterate our EURUSD forecast of 1.28
by end of Q2,” BNP Paribas said.
The euro has failed to clear $1.3400 and the market now
seems keen to first test the floor of a two-month range around
$1.3000. Against the yen, the euro was at 108.25, not
far off an overnight trough around 107.90.
A SHADE FIRMER
The dollar index, tracking the greenback’s
performance against major currencies, remained close to a
two-week high of 79.92 but had given back a bit of ground to
79.67.
With the dollar holding on to most of its chunky gains, the
Australian dollar struggled to decisively pull away from a
three-month low of $1.0243 plumbed on Wednesday even
though data showed China’s services sector expanded solidly in
March.
The Aussie last fetched $1.0291, with a 1.4 percent gain by
the Shanghai stock market helping it to hold above
support at $1.0263, the 50 percent retracement of the
November-February rally. China is Australia’s biggest export
market.
The Aussie was knocked from its February high of $1.0857 to
the previous session’s nadir by a soft patch of local data,
fears about a hard landing in China and expectations for a rate
cut next month.
The yen rose 0.2 percent on the dollar to 82.26 as
traders trimmed their short yen positions ahead of the Easter
holidays and the all-important U.S. jobs data on Friday.
There is now a growing feeling among investors that at least
some of the recent economic improvement in the United States may
have been due to the mild winter and traders are turning
cautious ahead of second-quarter economic data.
The key non-farm payrolls data due on Friday is expected to
show the U.S. economy added 203,000 jobs last month, after
February’s non-farm payrolls rose 227,000.
