--Euro positive despite gloomy German ZEW numbers and "prohibitively" expensive Spanish T-bill auction
--UK inflation eases, boosting stimulus hopes
--Hungarian forint strengthens on IMF news
By Eva Szalay
The euro crept higher after a bruising start to the week as traders braced for the slim chance of further monetary easing from the U.S. Federal Reserve on Wednesday, with the currency stable despite a raft of negative news, including an expensive Spanish T-bill auction and a disappointing German business sentiment reading.
Some traders also pointed to unsubstantiated chatter of the European Central Bank buying under-fire Spanish government bonds as a contributing factor to the common currency's rise to $1.2620 against the dollar.
The gains came after a session of erratic moves and disheartening headlines that showed German economic expectations souring at the fastest rate for more than a decade. The widely-watched German ZEW economic expectations index fell to - 16.9 in June from May's unrevised 10.8.
"This was the fastest decline in sentiment since the height of the Russian/Long-Term Capital Management crisis in October 1998," Simon Derrick, a currency strategist at the Bank of New York Mellon, wrote in a note to clients.
The currency had earlier dropped to near the day's low of $1.2568 after the German constitutional court ruled that the German government hadn't informed parliament sufficiently about the configuration of the European Stability Mechanism. Traders sold the currency aggressively fearing the decision would throw more hurdles in the way of policymakers struggling to solve the region's debt crisis. But the currency staged a quick bounce as the realisation grew that the decision is just a reiteration of an earlier ruling.
Meanwhile, Spain auctioned 3.039 billion euros ($3.89 billion) of 12-month and 18-month papers, with what Marc Ostwald, an interest rate strategist at Monument Securities, described as "prohibitively" high costs. Yields on the 12- month offering almost doubled to 5.074% from 2.985% at the previous sale in May. The average yield on the 18-month bills came in at 5.107%, up from 3.302%.
The sharp rise in yields came after news that the second part of a forthcoming audit of Spanish banks would be delayed until September. The banking audit will be closely watched for determining how much help the country's banking sector could potentially need.
"Spain needs not only an ESM package to recapitalize its banks, it also needs an outright bailout package," Mr. Ostwald said.
However, some market-watchers said that large euro losses are unlikely for now, as the Fed announces its monetary policy stance Wednesday, with a small chance of further easing.
"Investors are likely to think twice about adding to (negative) positions in the euro before a potential Fed easing announcement," analysts at Danske Bank said in a note to clients.
The pound saw hefty declines after inflation undershot expectations and slowed to its lowest level in more than two years, boosting expectations that the central bank would engage in more monetary easing. The consumer price index rose 2.8% on the year in May against consensus views of a 3% rise. Sterling hit the day's low at $1.5616.
The Hungarian forint showed strong gains against the euro after news that Hungary is ready to move on to official talks with the International Monetary Fund and the European Commission.
At 1054 GMT the euro was trading at $1.2613 compared with $1.2577, according to EBS via CQG. The currency was at Y99.51 from Y99.47.
Sterling traded at $1.5666 compared with $1.5664.
The dollar was at Y78.81 from Y79.12 and at CHF0.9523 from CHF0.9551,
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at about 81.788 from 81.959.
A summary of key levels for chart-watching technical strategists is below:
Forex spot: EUR/USD USD/JPY GBP/USD USD/CHF Spot 1016 GMT 1.2625 78.94 1.5664 0.9513 3 Day Trend Bearish Bearish Bullish Range Weekly Trend Range Range Range Bullish 200 day ma 1.3183 79.62 1.5823 0.9199 3rd Resistance 1.2748 79.51 1.5785 0.9650 2nd Resistance 1.2702 79.31 1.5742 0.9595 1st Resistance 1.2669 79.14 1.5695 0.9565 Pivot* 1.2615 79.03 1.5681 0.9513 1st Support 1.2568 78.78 1.5615 0.9503 2nd Support 1.2557 78.61 1.5599 0.9475 3rd Support 1.2518 78.18 1.5511 0.9420 Forex spot: AUD/USD Spot 1016 GMT 1.0152 3 Day Trend Bullish Weekly Trend Bullish 200 day ma 1.0247 3rd Resistance 1.0274 2nd Resistance 1.0247 1st Resistance 1.0225 Pivot* 1.0107 1st Support 1.0104 2nd Support 1.0057 3rd Support 1.0011
Write to Eva Szalay at eva.szalay@dowjones.com
(END) Dow Jones Newswires 06-19-120745ET Copyright (c) 2012 Dow Jones & Company, Inc.
FOREX-Euro dips, losses limited before Fed decision - Reuters
* Dollar index hovers near 1-month low
* Fed may extend Operation Twist, QE3 seen unlikely
* Dollar may rise if Fed refrains from QE3
SINGAPORE, June 20 (Reuters) - The euro eased versus the dollar but clung to much of the previous day's gains on Wednesday, with investors focusing on whether the U.S. Federal Reserve will adopt further monetary stimulus to support the economy's recovery.
The euro also gained some support from signs that Greek parties may be close to forming a coalition government, and as Spanish government bonds gained a bit of respite on Tuesday after a recent sell-off.
For now, however, the Fed's policy decision due later on Wednesday is taking centre stage.
"I think the overwhelming factor is some expectation of Fed stimulus today," said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong.
"Looking at the overnight moves, it's not just the euro that has risen," he said. "We've had a bunch of currencies taking advantage of the softness of the dollar."
The euro dipped 0.1 percent to $1.2671, giving back a bit of ground after climbing about 0.9 percent on Tuesday.
Resistance for the euro lies at $1.2748, a one-month high struck on Monday after Greek voters backed a pro-bailout party in weekend elections and fears of a disorderly Greek exit from the euro zone receded.
Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, cautioned against reading too much into the previous day's rise in the euro.
"It's hard for the euro to rise for reasons other than short-covering," Okagawa said, adding that the euro will probably trade in a range roughly between $1.23 to $1.28 over the next month.
With Spain's 10-year government bond yields having hit euro-era highs this week, fanning speculation that Spain may need a full-blown bailout, market players expect any bounce in the euro to be limited.
The dollar hovered near a one-month low against a basket of currencies ahead of the Fed's decision on Wednesday.
The dollar index stood at 81.459 , not far from a one-month low of 81.186 hit on Tuesday.
While many market players doubt that the Fed will go so far as to launch another round of quantitative easing, a policy that entails the expansion of its balance sheet via bond purchases, there might still be some disappointment if the Fed holds off from such stimulus, market players say.
A more likely scenario is for the Fed to extend "Operation Twist", a programme aimed at pushing down long-term borrowing costs by selling short-term securities to buy longer-term ones. The scheme is now due to end in June.
If all the Fed does is to extend "Operation Twist", the dollar could head higher, said Credit Agricole's Kotecha.
"There is some, perhaps in our view, misplaced hopes for QE3 today. We believe the Fed will probably extend its Operation Twist, but think QE3 seems unlikely at this stage," said Credit Agricole's Kotecha.
"So that could provoke a bit of disappointment if that is the case," he said.
The dollar eased 0.1 percent versus the yen to 78.88 yen . There was talk of stop-loss offers below 78.50 yen, while stop-loss bids were said to be lurking at levels above 79.50 yen.
Forex buy sinks in May - People's Daily Online
China recorded its lowest net purchase of foreign currency in May since June 2002, suggesting capital outflow and tightening liquidity in the market, experts told the Global Times Tuesday.
The nation's banks purchased a net 23.4 billion yuan ($3.68 billion) of foreign exchange last month, turning around from a net sale of 60.6 billion yuan in April, according to data released by the People's Bank of China (PBC) Tuesday. The banking system's foreign exchange purchase totaled 25.61 trillion yuan by the end of May, higher than the 25.59 trillion yuan purchase recorded for April, according to the central bank.
The foreign exchange purchase increased month-on-month in May mainly because of growth in the country's trade surplus and foreign direct investment (FDI) during the same month, Zhou Hao, a market analyst from ANZ China, told the Global Times.
Last month, China recorded a $18.7 billion, or 44 percent, gain in its trade surplus from April, according to the General Administration of Customs. Meanwhile, FDI added $9.23 billion during the same period, according to the Ministry of Commerce.
However, such a small net foreign exchange purchase indicates that China still faces capital flight and diminished monetary supply, said Zhou.
In May 2011, the country's net foreign exchange buy stood at 376.4 billion yuan, according to the PBC, about 15 times higher than the amount in May of 2012.
The market already feels that liquidity has been soaked up as the capital supply - which generally consists of foreign exchange purchases, matured central bank bills and repurchase agreements - remains low, while demand has surged with an increase in bond issuances due to the recent interest rate cut, said Zhou.
With the situation expected to remain the same in the months ahead, it is very probable that China will make another cut in the reserve requirement ratio (RRR) during the third quarter to ease liquidity and strengthen its weak economy, according to Sheng Hongqing, chief economist from China Everbright Bank.
China is likely to record small net foreign exchange purchases, or even net sales, in the near future as the trade surplus narrows and more export companies become unwilling to change their foreign currencies into the yuan that is expected to depreciate, said Sheng.
"In the future, a net purchase of foreign exchange can no longer be the main source to supplement money supply in the interbank market," Sheng said. "RRR cuts and reverse repurchase agreements will be a must to ease liquidity in the market."
How to Tweet Money to Your Favorite Politician - Businessweek
Campaigns that were just getting excited at the prospect of vacuuming up cash through text messaging, which the Federal Elections Commission green-lighted on June 11, may have yet another way to collect donations with a couple taps of the keyboard. Up to 140 taps, that is. Chirpify, a social-commerce startup based in Portland, Ore., has rolled out a site called Tweetlection at which donors can send money to Barack Obama and Mitt Romney via Twitter.
The process seems simple. All you need do is create an account with Chirpify, link it to your PayPal (EBAY) and Twitter accounts, and you could donate up to $200 instantly, just by tweeting “Donate $200 to @MittRomney for POTUS.” You log into Chirpify only once for the account setup, and then use Twitter, TweetDeck, or any other tweeting app as you normally would. ”There’s no shopping cart or checkout process,” says Chris Teso, Chirpify’s chief executive officer. “We’re calling it conversational commerce.”
The startup processes donations through PayPal. For the presidential candidates to collect the money, though, there’s a catch: Teso says they’ll have to create their own, free Chirpify accounts to cash in. If they don’t, your credit card won’t be charged. (Neither campaign has responded to a request as to whether they’ll participate.)
Teso says neither Romney nor Obama has signed on to a bigger deal with Chirpify that would let their campaigns collect more money in exchange for Chirpify’s 4 percent fee per contribution. That’s obviously the company’s hope. At least two dozen Republican senators and members of Congress will announce in the coming weeks that they’ll use Chirpify to solicit donations by tweet, Teso says. (He won’t name them.) Under those deals, campaigns can collect as much money as they want per tweet and Chirpify will supply them with information required by the FEC (i.e., donors’ full names, addresses, and occupations). The service could end up being a lot less costly than fundraising via text message, which the mobile payment aggregator known as m-Cube plans to roll out this summer at fees of up to 50 percent per donation.
Chirpify went live four months ago and is primarily used by individuals paying off IOUs. (As in: You didn’t have enough cash for your beer tab last night and need to pay back a friend today.) Teso says the company is also processing donations for the Make-A-Wish Foundation and running promotions for companies including Nestle (NESN:VX) , Power Bar, Pawngo, Sir Richard’s Condom Co., and Hewlett-Packard (HPQ). Those brands can advertise products to their Twitter followers, who can then place an order for a product by tweeting the word “buy;” Chirpify then coordinates with PayPal and the vending company to get the product paid for and shipped out.
Teso says the startup has tens of thousands of members and that “over 50 percent … have transacted in one form or another. That could be purchasing, donating, or paying you for dinner last night.” That’s nothing compared with Barack Obama’s 16.7 million followers, or even Romney’s 563,000. So far, though, their Twitter brigades aren’t exactly flooding Tweetlection. The site rolled out Tuesday; by noon Romney had $150 in pledges—and Obama just $132.
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