* Euro climbs above $1.23 to 2-week high
* Auctions outweigh weak German ZEW sentiment data
* Analysts see more euro short squeeze, worries remain
(Adds details, updates prices)
By Wanfeng Zhou
NEW YORK, June 15 (Reuters) - The euro hit a two-week high
above $1.23 on Tuesday as solid demand at European debt
auctions eased worries about the region's fiscal crisis and
prompted investors to cover short positions in the currency.
A surprisingly large fall in a German investor sentiment
index briefly slowed the euro's advance by suggesting the 16
country euro zone may face a period of slow economic growth.
But investors decided to look on the bright side after
Spain raised 5.2 billion euros at 12- and 18-month bill
auctions. Belgium netted 2.5 billion euros in an oversubscribed
auction of its own.
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"The refundings went better than expected. At least they
can get their business done without having it be exorbitantly
expensive. I think that's really important," said Andrew Busch,
currency strategist at BMO Capital Markets in Chicago. "We have
run the cycle of downward pressure on the euro for the time
being."
The euro was up 1 percent at $1.2343 <EUR=EBS>, after
rising as high as $1.2344, the strongest level since June 1. On
Monday, it closed above its 14-day moving average for the first
time since mid-April.
Against the yen, the euro <EURJPY=> was up 1 percent at
112.96 yen. The dollar was unchanged at 91.49 yen <JPY=>.
The Swiss franc <CHF=> jumped more than 1 percent to a
one-month high of 1.1299 francs per dollar.
Analysts said traders were taking profits on stretched euro
short positions. Commodity Futures Trading Commission data
showed speculators had boosted bets against the euro in the
week ended June 8 to just shy of record levels. []
"I think essentially we're at a point right now where the
market feels that the worst for the euro has been priced in for
the time being," said Boris Schlossberg, director of currency
research at GFT in New York. "We have sort of run out of fresh
reasons to short the euro."
CORRECTIVE MOVE?
Traders said central bank bids have helped keep the euro
above $1.20 over the last few trading sessions.
By rising above $1.2342 on Tuesday, the euro surpassed the
38 percent retracement of a sharp decline that began at $1.3094
in early May and bottomed out at $1.1876 last week.
Brown Brothers Harriman strategist Win Thin said that could
presage a move to $1.2485. But he also said the euro may find
it tough to go much further in the near future.
"Given that the root problem of insolvency remains in place
for several euro zone countries, we continue to view this euro
rally as a corrective move before the next move down," he
said.
A decision Monday by Moody's Investors Services to cut
Greece's credit rating to junk highlighted the issues still
facing some peripheral euro zone countries, as did a warning
from Spain's treasury secretary that lenders were facing a
liquidity freeze in the interbank market.[]
Greek government bonds will attract an extra 5 percent
penalty when banks use them as security for European Central
Bank funds, an ECB spokesman said on Tuesday. []
(Additional reporting by Steven C. Johnson; Editing by
Andrew Hay)
