FOREX-Euro firms though opinion grave on swelling debt crisis

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* Short covering boosts euro forward of weekend

* Debt predicament still points to weaker singular currency

* Interbank appropriation strains boost dollar demand

(Updates levels, adds details, comments)

LONDON, Nov 18 (Reuters) – The euro rose opposite the
dollar on Friday as investors unwound bearish bets on a single
currency to book increase forward of a weekend but, with a euro
zone debt predicament escalating, ardour to sell on upticks was
high.

Pressure was ascent on a European Central Bank to step
up a bond-buying programme with Italian and Spanish bond
yields tighten to unsustainable levels and plummeting direct from
other, real-money investors.

Until a resolution emerges that creates a ECB a lender of
last resort, any gains in a euro are expected to be fleeting.

“With so many adult in a atmosphere there’s zero else to concentration on
apart from a immediate, that is that a euro section looks to
be streamer into a precipice. Ahead of a weekend we don’t
think anyone is prepared to opposite that view,” Jane Foley, senior
currency strategist during Rabobank.

The euro rose 0.4 percent to $1.3510, not distant from
its five-week low of $1.3421 struck on Thursday and still down
roughly 2 percent for a week.

Support for a singular banking lies during around $1.3405, the
76.4 percent retracement of final month’s convene from around
$1.3145 on Oct (KOSDAQ: 039200.KQ – news) . 4 to a high of $1.4248 on Oct. 27. Large option
expiries during $1.3500 and $1.3550 are also expected to lean trade.

“The marketplace has an ardour to take on new shorts because
without a ECB there doesn’t seem to be any other customer in the
European emperor debt market,” Foley said.

Bond marketplace experts polled by Reuters saw a 50/50 chance
that a ECB will enhance bond purchases to rivet in outright
quantitative easing.

Prospects for a euro have dimmed this week on signs that
the predicament was swelling to core euro section countries such as
France, with many investors still looking to sell into every
rally.

With German bond yields no longer descending as peripheral
yields rise, analysts suggested that portfolio adjustments were
not only relocating from marginal debt to core Bunds, though that
investors were abandoning a euro section altogether.

Traders contend that given a bulk of investors have already
been using bearish positions on a euro in a past few
months there is singular range for a banking to tumble further,
despite what some politicians have described as a misfortune crisis
in a segment given World War II.

While highlighting a risk that a brief fist could
push euro/dollar aloft in a nearby term, Commerzbank (EUREX: CBKF.EX – news)
strategists pronounced a prevalent trend was for a reduce euro.

“Courageous marketplace participants can sell a euro around
$1.3550-60, we would start cutting euro/dollar during $1.3650,”
the bank pronounced in a note.

FUNDING STRAINS

With investors shunning euro section assets, appropriation strains
were augmenting for euro section financial institutions, boding ill
for a euro and other riskier resources while charity support for
the viewed reserve of a U.S. dollar.

The reward for swapping euros into dollars rose, with the
three-month cross-currency basement barter hitting
138.5 basement points, a top given a 2008 financial crisis.

“So distant this has not had a thespian outcome on a euro, but
it is expected to be behind some of a new weakening,” said
FxPro’s arch economist Simon Smith.

Analysts pronounced high appropriation costs were pulling banks into
shorter generation appropriation and could widespread into mark currency
markets, weighing on a euro.

With many investors preferring safety, a yen outperformed
the dollar. The dollar dipped to a two-and-a-half week low
against a yen of 76.63 yen.

“Generally protected havens are doing really good during a impulse and
once you’ve filled adult your bearing on dollars, a yen is the
next one in line, irrespective of either we competence be worried
about intervention,” pronounced Adam Myers, comparison FX strategist at
Credit Agricole (Milan: ACA.MI – news) in London.

This tumble extended a yen’s delayed climb behind towards levels
where Japanese authorities intervened on Oct. 31 to break the
currency. However, Myers pronounced a stream gait of strengthening
meant another turn of involvement was doubtful to come until
next year.

The Swiss franc also outperformed a dollar, pushing
dollar/Swiss franc down 1 percent on a day to 0.91160 francs.
The dollar was final trade during 0.9145 francs, down 0.8 percent
on a day.

(Additional stating by Pratima Desai; Editing by Susan
Fenton)

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