FOREX-Euro struggles as debt worries overshadow data

* Euro (EUR=: ) off highs as peripheral spreads widen

* Investors shrug off robust German growth data

* Traders await U.S. retail sales, inflation data

* Euro could fall as low as $1.2735 – analyst

(Adds quotes, updates prices)

By Anirban Nag

LONDON, Aug 13 (BestGrowthStock) – The euro turned lower on Friday,
giving up modest gains as worries about peripheral economies
returned to dog investors who were briefly encouraged by strong
German growth data earlier in the session.

Traders said stop-loss selling in the euro (EUR=: )
accelerated after the single currency fell below $1.2820. The
latest drop in the euro came as the spread between Spanish and
benchmark German 10-year government bonds widened to 172 basis
points, the highest since July 19.

The spread between 10-year Greek and German bonds went out
to its widest since late June after uninspiring results in an
Italian bond auction prompted investors to pare positions in the
euro on debt concerns. [ID:nLDE67C0V6]

Earlier, the euro had risen after data showed Germany’s
economy grew more than expected in the second quarter. German
preliminary gross domestic product (GDP) rose 2.2 percent in the
three months to June, much higher than forecasts for a 1.3
percent gain. [ID:nLDE67B1IT]

Growth for the entire euro zone rose 1.0 percent in the
second quarter, but some peripheral economies were struggling,
highlighting the two-speed nature of the euro zone’s recovery.

But the boost for the euro turned out to be short-lived with
many using the bounce to sell.

“The euro failed to hold on to the gains made after the
German GDP numbers as the peripheral economies are still
struggling and worries about a global recovery remain,” said Ian
Stannard, senior currency strategist at BNP Paribas.

“With risk appetite falling and volatilities rising, we
could see the euro fall as low as $1.2735, which is technically
pretty significant.”

That level was the low struck on July 22.

By 1106 GMT, the euro was down 0.2 percent from late U.S.
trade on Thursday at $1.2805 (EUR=: ), having risen to a session
high of $1.2906. It was on track to fall 3.4 percent against the
dollar on the week, its biggest drop since mid-May.

On Wednesday, the dollar logged its biggest one-day
percentage rise against the euro since October 2008, as concerns
about the global economic outlook prompted investors to cut
positions in riskier assets.

The dollar index (Read more about the global trade. ), a gauge of the greenback’s performance
against six major currencies, was unchanged at 82.63 (.DXY: ),
after rising 0.4 percent on Thursday. On the week, it was
tracking a rise of 2.6 percent, its best since mid-May.

Traders will eye U.S. retail sales, which will give a first
look into consumer spending in the third quarter. U.S. consumer
inflation is expected to show a rise of 0.2 percent in July.
(ECON: )


The yen, which hit 15-year highs against the dollar earlier
this week, pulled back on news Japan’s prime minister and the
central bank chief would meet next week to discuss the yen.

The greenback stood at 85.68 yen (JPY=: ) after rising to
86.21 yen. Resistance was seen ahead of stops at 86.30/50 yen.

Japanese authorities heightened their rhetoric, and the Bank
of Japan was seen checking rates on Thursday after the yen
climbed to 84.72 yen on Wednesday, its highest since July 1995.

“We’re seeing a bit of a pullback on worries of what might
happen over the weekend, but we see the risk of intervention as
low, and have a positive view on the yen,” said Adam Cole,
global head of FX strategy at RBC Capital Markets.

Market players say they do not expect actual intervention
unless the dollar makes a move towards its record low of 79.75
yen, or the drop becomes more volatile.

“This is an opportunity to cover some short (dollar)
positions, but traders are likely to continue to target a break
of 80 yen,” said Tsutomu Soma, senior manager of foreign
securities at Okasan Securities.
(Additional reporting by Tamawa Desai in London; Editing by
Hugh Lawson)

FOREX-Euro struggles as debt worries overshadow data