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Euro rises after ECB rate hold decision

Thursday, October 04 14:11:12

The euro rose today, helped by the European Central Bank keeping interest rates unchanged, and looked likely to hold firm on expectations Spain was edging closer to a bailout.

Players were expecting few surprises from ECB President Mario Draghi's news conference at 1230 GMT after the central bank held rates at 0.75 percent.

Anticipation that Spain will ask for a bailout and trigger the ECB's bond-buying plan has made investors wary of selling the euro although uncertainty about when such a request could come has limited the currency's gains.

The euro rose 0.4 percent to $1.2968, testing the top of its recent $1.2800-$1.2970 range. Strong support was cited around the 200-day moving average at $1.2823.

"Draghi is probably going to reiterate that the ball is in the politicians' court. But I do not think that would be a great surprise. What is key for euro/dollar going forward is going to be Spain," said Michael Sneyd, FX strategist at BNP Paribas.

Sneyd said he expected U.S. non-farm payrolls data on Friday to have a bigger impact than the ECB. While a stronger number may boost appetite for risk, helping the euro and weighing broadly on the safe-haven dollar, the U.S. unit could also slide if weak data fuelled concern about the U.S. economy.

Also in focus on Thursday was a debt auction at which Spain raised 4 billion euros ($5.2 billion) selling tranches of bonds maturing in 2014, 2015 and 2017. Yields fell from the previous auction though, traders said, not enough to boost the euro.

The euro rose to a two-week high against the Swiss franc at 1.2136 and a two-week peak against the pound at 80.40 pence.

The pound edged slightly higher against the dollar to $1.6115 after the Bank of England kept rates and its quantitative easing total on hold as expected. (C ) Reuters