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Euro falls on Spain and Greece concern

Tuesday, October 09 09:46:28

The euro fell today, pulling further away from recent highs as uncertainty about when Spain will apply for a bailout and fresh concerns about Greece weighed on investor sentiment. Losses were likely to be limited on steady demand for the single currency and growth-linked currencies at lower levels after China's central bank became the latest to take additional stimulus measures to support growth. The euro fell to $1.2907, well below a two-week high of $1.3072 hit on Friday. Traders cited bids below $1.2900 and offers around $1.3000, suggesting the single currency was likely to be pinned in a familiar range.

Against the yen, it was down 0.3 percent to 101.24 yen , well below Friday's two-week high of 102.80 yen, as some Japanese investors exited their long euro/yen positions. "While uncertainty about Spain plays out, investors are also getting worried about the Greek situation," said Adam Myers, senior currency strategist at Credit Agricole. "The euro will reach inflexion point once Spain goes for a bailout, perhaps later in the month. But until then, it will be a bit difficult for it to break out and hit recent peaks," he added. Euro zone finance ministers defended Spain on Monday, saying the country was taking steps to overhaul its economy, successfully funding itself in the financial markets and did not need a bailout, at least for now.

The finance ministers and the International Monetary Fund also held a "thorough and robust" debate on Greece, but failed to make significant progress in deciding how best to get the country back on track with its bailout programme. Late in September, Reuters reported Greece's international lenders were at loggerheads over how to solve Athens' debt crisis with the IMF demanding European governments write off some of the Greek debt they hold. Greek Finance Minster Yannis Stournaras said international lenders were considering its request to give Greece two more years to reach its budget deficit reduction targets but he added they had just started discussions. ( C) Reuters