Euro falls in Asia

The euro fell on Thursday as uncertainty over Spain's bailout prospects continued to spook sentiment, which was also dented by a drop in share markets due to worries about slowing global growth. The euro slipped after Standard & Poor's cut Spain's sovereign credit rating to BBB-minus, just above junk status, with a negative outlook reflecting significant risks including a lack of clear direction in euro zone policies.
S&P's two-notch downgrade from BBB-plus follows an earlier cut by Moody's Investors Service, which could sink Spain's credit rating down to junk territory when it announces the result of its review expected in coming weeks. Investors widely expect some kind of aid package for Spain, which has also applied for a euro zone bank rescue, as the prolonged recession deepens the government's fiscal deficits. But the prospect that the euro zone's fourth-largest economy will follow smaller peers - Greece, Portugal and Ireland - in asking for lifelines by international lenders has instilled uneasiness.
"Given that the S&P still kept Spain's investment grade, the reaction was much more than expected, suggesting how players would rather enter the market short than long the euro," said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo.
The euro fell to its lowest since October 1 of $1.2825 before recovering to trade down 0.1 percent at $1.2864. Traders said some market players may want to test the single currency's key technical support at its 200-day average of 1.2823, and the October 1 low of $1.28035. The euro's weakness was magnified by a rebound in another risk-sensitive currency, the Australian dollar.
The Australian dollar reversed earlier losses and climbed to its highest since October 2 of $1.0288, after the country's employment rose more than expected by a seasonally adjusted 14,500 in September, while the jobless rate also rose to 5.4 percent as more people joined the workforce. The Aussie also regained against the yen to add 0.3 percent to 80.12 yen from below 80 yen before the data. "The Aussie is a risk currency, but there is an emerging view recently that some investors may be preferring the Australian dollar as a sort of reserve currency now that the euro is clearly unstable. This may be one reason why the Aussie has remained relatively resilient," said Tomita at State Street Global Markets.
The euro fell about 0.5 percent against the Aussie at A$1.2514, its lowest since October 2, and was down 0.2 percent against the Japanese yen at 100.37 yen. The Japanese currency's strength against an overall weak euro capped dollar/yen, which eased 0.2 percent to 78.04 yen, after touching 77.99 yen. But the pair's downside was also seen limited. The yuan hit an intraday high of 6.2781 versus the dollar, its highest level since China set up the domestic foreign exchange market in 1994, but there was little impact in the broader currency market.