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FOREX-Euro rises on Spain auction; yen, Swiss franc soar

Reuters

* Spanish bond auction eases worries about debt woes

* Stop-losses on short positions triggered through $1.2360

* Swiss franc up, SNB omits pledge to curb currency rise

* Yen up on weaker-than-expected Philly Fed, claims data (Updates prices, adds details,
comment; changes byline)

By Steven C. Johnson

NEW YORK, June 17 (Reuters) - The euro hit a three-week high on Thursday above $1.24
after a Spanish bond auction soothed worries about the country's finances and worse-
than-expected U.S. data weighed on the dollar.

The Swiss franc also rallied after Switzerland's central bank backed off its pledge to fight
excessive franc strength now that deflation risks have receded. For details, see

Spain's 10-year government bond sale had decent demand and provided new opportunities
for traders to buy the euro. The currency's move through an important technical level at
$1.2360 triggered automatic buy orders and another bout of short-covering that pushed
the euro above $1.24 for the first time since late May.

But the euro had retreated to $1.2362 by early afternoon , up 0.4 percent, after hitting
$1.2413 earlier. Analysts said some were still anxious about the results of bank stress tests
the Spanish central bank said would be published soon. [ID:nLDE65F1AL

Also, a decline in the Philadelphia Federal Reserve's mid-Atlantic manufacturing index and
a rise in first-time jobless claims dulled market risk appetite and boosted the yen. The
dollar fell 0.7 percent to 90.81 yen and the euro slipped 0.2 percent to 112.26 yen.

"Philly Fed was slightly weaker than expected and that's contributed to equities turning
around and the pretty significant gain in the yen," said John Doyle, senior currency
strategist at Tempus Consulting in Washington. "In the near term it causes some worry
about the U.S. growth outlook."

The euro fell 1.2 percent to 1.3761 Swiss francs after the SNB backed away from
intervention, leaving it near a 1.3731 record low hit on June 9, according to Reuters . The
dollar fell 1.6 percent to 1.1133 francs .

EURO RISKS REMAIN

Against the dollar, the euro has regained more than 5 cents from a four-year low of

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$1.1876 set on EBS last week, though it remains more than 13 percent lower in 2010.

The euro rose along with investor spirits after Spain's bond action. The spread between
Spanish government bond yields and benchmark German Bunds narrowed from a euro
lifetime high after the auction.

Analysts at Action Economics said euro zone central banks were reportedly among the
buyers, along with interest from a sovereign account.

European Union leaders also moved toward agreement Thursday on ways to strengthen
budget discipline and economic policy coordination among the 27 member states to contain
a euro zone debt crisis.

Technical analysts at Commerzbank said the euro's correction could continue toward
resistance at $1.2445/1.2570 -- the 2009 low and the 38.2 percent retracement of the
move down from April to June.

But worries remain about the long-term ability of Spain and other euro zone countries to
finance themselves while cutting budget deficits. Spain ended up paying a borrowing
premium on Thursday compared to its last 10-year debt sale in May.

"There are still worrying signs for Spain, particularly stresses in the Spanish bank funding
market," said Lee Hardman, currency strategist at BTM-UFJ. "We think the euro rally is
being driven by position adjustment rather than fundamentals."

(Additional reporting by Wanfeng Zhou in New York and Neal Armstrong in London; Editing
by Andrew Hay)

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1:45PM ET, Thursday, June 17, 2010

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