SINGAPORE/TOKYO: The euro fell to a two-week low a gainst the dollar on Wednesday, dragged down by mounting worries ab out Spain's r eluctance t o requesta bailout even as ant i-government pro tests turned violent.
Uncertainty over when Spain will seek external aid, a condition for the European Central Bank to start buying Spanish debt, has cast a pall over the euro, which pulled further away from a four-month high set last week.
The single currency fell 0. 3 percent to $1.286 3, having dipped to $ 1 .285 6 at one point, its lowest level i n two weeks. It h as come back under pressure after hitting th e fo ur-month high near $1.3173 early last week.
On Tuesday, protesters clashed with police in Madrid on Tuesday, as the Spanish government prepared a new round of unpopular austerity measures for the 2013 budget to be announced on Thursday.
Demand for euros from some market players that were caught off guard by its recent rally may lend the single currency some support, but an y g ains are likely to be limited in the near term, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
"I think what we're seeing is a reversal of some excessive moves that we saw earlier," Okagawa said, referring to the euro's recent short-covering rally that had lifted the single currency about 9 percent from a two-year low hit in late July.
Any rise in the euro to levels above $1.30 is likely to be short-lived, and the single currency will probably have a hard time staying above 100 yen, he added.
T he euro fell 0.4 percent against the Japanese currency to 9 9. 9 9 yen, having retreated from an intraday high of 100.46 yen.
Against the dollar, possible support for the euro lies near $1.2826, its 200-day moving average.
"The euro should find support at levels around $1.28... If that is breached, I think that would suggest that a try for the upside has ended," said a trader for a European bank in Tokyo, adding that the euro may then start falling towards $1.25.
The euro's retreat helped lift the yen, with the dollar easing 0.1 percent to 77.75 yen, n ot too far from a seven-month low of 77.13 yen hit on Sept. 13, the day the US Federal Reserve announced aggressive monetary stimulus to promote the economy's recovery.
The dollar could ease toward 77.50 yen in the near term, but the US currency may then rebound as there are heavy dollar bids at that level, said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.
Traders say the yen could get a lift this week from Japanese fund repatriation ahead of half-year book-closings, although some market participants said many companies had already covered their needs so such flows were unlikely to be significant.
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