FOREX-Euro slides on Moody’s news, but losses seen limited

* Euro falls after Moody’s says it may cut Spain’s rating

* Euro debt worries lift Swiss franc to record vs euro

* Dollar gains ground as Treasury yields rise

* Empire State manufacturing index rises
(Recasts, updates prices, adds U.S. data, changes byline,
dateline, previous LONDON)

By Gertrude Chavez-Dreyfuss

NEW YORK, Dec 15 (BestGrowthStock) – The euro fell (Read more about the trembling euro. ) broadly, hitting
a record low versus the Swiss franc on Wednesday, after Moody’s
said it may downgrade Spain’s debt rating, but losses may be
contained as liquidity thins going into the holiday season.

The dollar, on the other hand, rose, bolstered by U.S. data
showing a steady recovery in the New York state’s manufacturing
sector. A somewhat soft U.S. consumer price index, while
supportive of the Federal Reserve’s quantitative easing, did
not alter the view that the economy is growing modestly.

Investors on Wednesday, however, focused more on contagion
risks from the euro zone debt crisis. The Moody’s news, saying
the ratings agency placed Spain’s Aa1 ratings on review for a
possible downgrade, was a reminder that fiscal problems in
Europe are far from over. [ID:nL3E6NF0D8]

The Moody’s report pushed Spanish bond yields (ES10YT=RR: )
higher. [GVD/EUR]

Still, some analysts suggested investors are less likely to
sell the euro further given that the market has pretty much
priced in most of the bad news on the euro zone. Analysts said
the Moody’s news, while clearly negative for the euro, didn’t
add anything new to the debate on the region’s crisis.

“The ratings news had an impact on the euro but there has
been no follow-through,” said Matthew Strauss, senior currency
strategist, at RBC Capital in Toronto.

“We’re starting to see lower liquidity toward the holiday
season and the market right now is unwilling to take the euro
lower. The momentum is not favoring euro losses because of a
lack of conviction.”

In early New York trading, the euro was down 0.4 percent
against the dollar at $1.3330 (EUR=: ), off an earlier low of
$1.3285 where traders reported sovereign demand for the

The euro edged 0.2 percent lower against the Swiss franc to
1.2807 francs (EURCHF=EBS: ), having hit a record low of 1.2758
on trading platform EBS in the wake of the Moody’s news on

The Swiss currency gained as worries about debt problems in
some European countries encouraged investors to reduce exposure
to riskier euro zone assets and seek safer alternatives.

Contributing to the euro’s fall, the dollar firmed after
mostly upbeat economic data lifted U.S. bond yields, enhancing
the appeal of some dollar-denominated assets. For a U.S.
economic wrap-up, click on [ID:N15127066].

“On balance, the data doesn’t really change expectations
that the economy is improving gradually and because it hasn’t
really surprised in either direction, it essentially allows the
market to revert back to what it’s most comfortable with,” said
Omer Esiner, chief market analyst, at Commonwealth Foreign
Exchange in Washington.

“Right now, that’s selling the euro on increasing sovereign
credit concerns.”

The dollar gained 0.4 percent against a basket of major
currencies to 79.693 (=USD: )(.DXY: ), moving away from a
three-week low of 78.819 plumbed on Tuesday.

The 10-year U.S. Treasury yield hit a seven-month high just
above 3.50 percent in Asian trade, helped by above-forecast
U.S. retail sales data. [ID:nN14261708]

For a FX column on U.S. yields and the dollar, click


Concerns lingered, however, that a proposed extension to
tax cuts would worsen U.S. fiscal problems even if they help
the economy. Traders said that for some investors this made the
Swiss franc a more attractive safe-haven asset than the

(Additional reporting by Jessica Mortimer in London and
Wanfeng Zhou in New York)
(Editing by Theodore d’Afflisio)

FOREX-Euro slides on Moody’s news, but losses seen limited