Spain - the melting pot is slowly cooking up! And it is slow because it is so huge!
OREX-Euro down broadly as Spanish news adds to jitters
* Euro slips, pauses from short-covering rally
* Spain's CajaSur takeover keeps investors euro-negative
* CFTC: IMM speculators trimmed record short euro positions
(Adds comment, updates prices; changes dateline, previous
LONDON and byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, May 24 (Reuters) - The euro fell broadly on
Monday, pulling back from gains last week, after the Spanish
central bank's takeover of a savings bank added to jitters
about debt problems in some of the weak euro zone countries.
The Bank of Spain said on Saturday it had taken over the
running of CajaSur following the failure of its planned merger
with another regional lender. [ID:nLDE64L007] The move
highlighted the weakness of the banking sectors of some euro
zone members, already suffering from fiscal problems and
struggling to bring down their budget deficits.
The news also wiped out last week's short-covering rally in
the euro spurred by fears European monetary officials may
intervene to prop up the beleaguered single currency.
"We did have news about the Spanish bailout of a bank. But
that's only part of the story," said Matthew Strauss, senior
currency strategist, at RBC Capital Markets in Toronto.
"What we saw last week was a short-squeeze rally on the
euro and that was short-lived. Overall, the underlying theme is
still one of risk aversion."
In early New York trading, the euro <EUR=> was down 1.6
percent on the day at $1.2369. It fell 1.3 percent versus the
yen <EURJPY=R>.
Traders said euro losses accelerated after stop-loss orders
were triggered under $1.2480. European banks and Asian central
banks were also seen selling the euro in quiet trade, with many
European markets on holiday.
Last week, the euro fell to a four-year low of $1.2143.
Support is seen around $1.2135, the 50 percent retracement from
the euro's all-time low to its all-time high.
Further adding to the stress was news on Monday that
Spain's largest workers union was heading for a general strike
in protest at the government's austerity measures, although it
preferred not to call one. [ID:nMDT009049].
MORE EURO LOSSES
The euro has retreated from $1.2670 hit on Friday. It
rallied last week as investors exited extreme short positions
in the single currency, in part due to fears of intervention to
prop up the euro after its dramatic decline in past weeks.
For an analysis of intervention prospects, see
[ID:nLDE64K12A]
"The euro's short squeeze isn't sustainable," said Chris
Turner, head of currency strategy at ING. "The market is
waiting for the next negative news from the euro zone to sell
the euro."
Commodities Futures Trading Commission data shows IMM
speculators had by early last week cut back slightly on record
bets the single European currency will weaken. [IMM/FRX] |
