* Euro slips, pauses from short-covering rally
* Spain's CajaSur takeover keeps investors euro-negative
* CFTC: IMM speculators trim record short euro positions
* U.S. existing home sales rise, boosts dollar
(Adds fresh comment, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, May 24 (Reuters) - The euro slid on Monday,
pulling back from last week's gains, as the Spanish central
bank's takeover of a small savings bank added to jitters about
debt problems in weaker euro zone economies.
The Bank of Spain on Saturday said it had taken over
CajaSur following the failure of its planned merger with
another regional lender. []
The move highlighted weakness in the banking sectors of
some euro zone members already suffering from fiscal problems
and struggling to bring down budget deficits.
The news wiped out last week's short-covering rally in the
euro spurred by talk European monetary officials might
intervene to prop up the beleaguered single currency.
"The Spanish news is not really a big story, but it does
highlight that there are a lot of cracks in the financial
system," said Steven Butler, director of foreign exchange
trading at Scotia Capital in Toronto. "The concern is that if
these cracks get bigger, the question is who would be able to
contain it. This is obviously a warning and we'll see if it
becomes more significant."
CajaSur accounts for a little more than 0.5 percent of the
Spanish banking industry. It now has access to Spain's bank
bailout fund. Analysts worry other savings banks could require
money from the fund at a time when Spain is trying to slash
government spending and repair public finances.
In late morning New York trading, the euro <EUR=> was down
1.5 percent on the day at $1.2386. It fell nearly 1.0 percent
versus the yen <EURJPY=R to 112.03.
Traders said the euro's losses accelerated after stop-loss
orders were triggered under $1.2480. European banks and Asian
central banks were also seen selling the euro in quiet trade,
with many European markets on holiday.
Last week, the euro fell to a four-year low of $1.2143.
Support is seen around $1.2135, the 50 percent retracement from
the euro's all-time low to its all-time high.
News U.S. existing home sales rose more than expected in
April briefly pushed the euro to session lows against the
dollar at $1.2345, according to EBS data. For the U.S. existing
home sales report, click on []
"The (housing) data should at the margin work in favor of
quelling a still skittish equity market, but it is going to
need a big data point, like non-farm payroll, to act as a
significant offset to the nervousness instigated from across
the Atlantic," said Alan Ruskin, chief currency strategist, at
RBS Global Banking and Markets in Stamford, Connecticut.
The euro has retreated from $1.2670 hit on Friday. It
rallied last week as investors exited extreme short positions
in the single currency, in part due to fears of intervention to
prop up the euro after its dramatic decline in past weeks.
Commodities Futures Trading Commission data shows IMM
speculators had by early last week cut back slightly on record
bets the single European currency will weaken. []
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For the chart on the latest data on euro positioning, click
on http://graphics.thomsonreuters.com/0210/EZ_CFTC0210.gif
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Those positions have ballooned in past months, pushing the
euro lower against the backdrop of Greece's debt crisis, which
has threatened to spread to Spain and Portugal and raised
concerns about the euro's stability.
Liquidity has dried up, leaving investors scrambling for
safe-haven dollars. This helped to boost the dollar roughly 1.1
percent higher against a currency basket <.DXY> to 86.304 on
Monday.
Against the yen, the dollar rose 0.4 percent to 90.36
<JPY=>, while sterling was down 0.2 percent at $1.4434 <GBP=>
(Editing by Andrew Hay)
