SYDNEY/TOKYO: The euro held firm above a two-week low on Friday after Spain unveiled a crisis budget that many saw as a step towards a bailout to stabilise its public finances.
The single currency looks set to end the quarter with a small gain, but is likely to stay under pressure in the coming quarter, with many pitfalls ahead, not just in Spain, now beset by anti-austerity protests and a secession threat, but also in Greece, where the whole debt saga started.
"I expect the euro to gradually decline. There's a risk of credit downgrade on Spain.
The talk between Greece and the troika may get nowhere. And the euro zone economy will be fragile," said Minori Uchida, chief currency analyst at the Bank of Tokyo-Mitsubishi UFJ.
The euro stood at $1.2934, up slightly from late US levels after having bounced from a two-week low of $1.2828 on Thursday, with its 200-day moving average around $1.2825 serving as a substantial support.
The currency is up 2.1 percent on the quarter, thanks largely to hopes that Spain's borrowing costs would be brought down when the European Central Bank starts buying Spanish debt, a programme that needs Spain's request for a bailout to be activated.
Initial resistance for the euro is seen at $1.2960, the 38.2 percent retracement of its Sept 17-27 slide.
Spain also announced a timetable for economic reforms that EU Economic and Monetary Affairs Commissioner Olli Rehn says goes beyond what the European Commission required.
All this is widely seen as paving the way for eventually seeking a bailout. Madrid is talking to EU authorities about the terms of a possible aid package.
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