FOREX-Euro stabilizes above lows after Spain downgrade

* Japan exporters may cap dollar/yen when it nears 91.50 yen

* Activity overall likely limited except month-end flows

* Market holidays in U.S., UK keep action low key

By Kaori Kaneko

TOKYO, May 31 (BestGrowthStock) – The euro edged up against the
dollar on Monday after falling following a downgrade in Spain’s
credit rating by Fitch Ratings which revived concern about
Europe’s debt woes and their impact on the global economy.

But investors avoided building positions up as the United
States and the UK are on holiday on Monday. Some month-end dollar
demand emerged against the yen but Japanese exporters were
expected to sell into moves up to 91.50 yen (JPY=: ), traders said.

The euro is on track for a fall of more than 7 percent
against the dollar in May, in what would be its sixth straight
monthly fall and the biggest percentage drop since January 2009.

Traders say euro support lies at this month’s four-year low
of $1.2143 and then around $1.2135, a 50 percent retracement of
its 2000-08 advance. It stood at $1.2325 (EUR=: ) on Monday.

“The sell-off in the euro/dollar (on Friday) was not panic
selling and the currency seems to be stuck in a range, although
worries about Europe’s debt trouble still persist,” said Satoshi
Okagawa, head of forex and money trading at Sumitomo Mitsui
Banking in Singapore.

Market attention is shifting to the U.S. employment report
for May due on Friday to see whether it can help market sentiment
when concerns about Europe’s fiscal problems continue, traders
said. [ECI/US]

“The market is waiting for the jobs data to see if the U.S.,
whose economic figures are relatively firm, could provide support
for the global economy,” Okagawa said.

Fitch cut Spain’s credit rating by one notch to AA-plus on
Friday, saying the country’s economic recovery will be “more
muted” than the government forecast due to its austerity
measures. The outlook on the new rating is stable. [ID:nWNA2365]

The euro rose 0.4 percent to $1.2325 (EUR=: ) but selling was
expected above $1.2400, a trader at a major Japanese bank said.

Charts indicate a monthly close below $1.2135 would favour
additional weakness, with the next downside support seen near
$1.1640 — a trough hit in November 2005.

The euro rose 0.7 percent to 112.68 yen (EURJPY=R: ), having
fallen 0.7 percent on Friday.

“People are also watching to see if the EU can reassure
markets that it is unified over the fiscal problem and if
international cooperation can be implemented when fears about the
financial system deepen,” said Ayako Sera, market strategist at
Sumitomo Trust & Banking.

Finance ministers and central bankers from the Group of 20
wealthy and developing economies gather in South Korea later this
week to grapple with Europe’s debt crisis, financial reforms and
efforts to rebalance the global economy. [ID:nSGE64R00R]

The dollar edged up 0.4 percent to 91.43 yen (JPY=: ). Traders
reported some buy stops above 91.50 yen if the dollar could push
through exporter sales.

The Australian dollar was steady at $0.8476 (AUD=D4: ) ahead of
Reserve Bank of Australia’s rate decision on Tuesday, with
expectations the central bank to keep it on hold at 4.50 percent.

The yen crosses rebounded after falling on Friday. The Aussie
gained 0.7 percent to 77.43 yen (AUDJPY=R: ).

Market players are keeping an eye on politics in Japan after
the tiny Social Democratic Party on Sunday left the ruling
coalition ahead of an upper house election, although the impact
on the currency market so far was limited. [ID:nSGE64T00L]

Sterling was steady at $1.4485 (GBP=D4: ) after a British
treasury minister, an architect of plans to rein in the budget
deficit, resigned on Saturday following revelations about his
expenses. [ID:nLDE64S0HK]

Stock Investing

(Additional reporting by Anirban Nag in Sydney, Reuters FX
analyst Krishna Kumar, Rika Otsuka and Satomi Noguchi in Tokyo;
Editing by Charlotte Cooper)

FOREX-Euro stabilizes above lows after Spain downgrade