* Euro rises after well covered Spanish bond auction
* Stop-losses on short positions triggered through $1.2360
* Swiss franc up; SNB steps back from interventionist stance
(Adds detail, updates prices)
By Neal Armstrong
LONDON, June 17 (Reuters) - The euro hit a three-week high
versus the dollar on Thursday as worries about Spain's public
finances were eased by a well covered bond auction, triggering
stop-losses on stale short positions in the single currency.
The Swiss franc rose after the Swiss National Bank relaxed
its interventionist stance and said deflationary risks in the
Swiss economy had all but disappeared.
The spread of Spanish government bond yields over benchmark
Bunds soared to a euro lifetime high on Wednesday, but a well
covered auction, albeit at a high yield, led spreads to tighten
and the euro to rally to a session high. []
"The auction went reasonably well but with rising yields
it's not that much of a surprise. There are still worrying signs
for Spain, particularly stresses in the Spanish bank funding
market," said Lee Hardman, currency strategist at BTM-UFJ.
At 1110 GMT, the euro was up around 0.6 percent versus the
dollar <EUR=> at $1.2375, off session highs of $1.2395. It had
fallen to a low of $1.2243 as worries over Spain's public
finances and banking sector dented sentiment in early trade.
"We think the euro rally is being driven by position
adjustment rather than fundamentals in particular," Hardman
added.
Traders said stop-losses placed above this week's highs in
the $1.2355/60 area were targeted and triggered in the wake of
the Spanish auction.
Technical analysts at Commerzbank said the euro's correction
could continue towards resistance at $1.2445/1.2570 - the 2009
low and the 38.2 percent retracement of the move down from April
to June.
The euro has regained more than 500 points from a four-year
low hit on June 7 at $1.1876, but is still down more than 13
percent year-to-date.
The European Union and International Monetary Fund denied on
Wednesday a report they and the U.S. Treasury were drawing up a
safety net for Spain. But worries about Spanish banks put
pressure on bond yields and the market will be looking for the
results of bank stress tests which the Spanish central bank said
would be published soon. [] []
The EU holds a summit on Thursday to discuss ways to
strengthen budget discipline and economic policy coordination.
SWISS FRANC RISES
The Swiss franc rose versus the euro and the dollar after
the SNB omitted specific reference to the currency in the
statement accompanying its decision to leave interest rates on
hold. []
The SNB said deflationary risks had all but disappeared,
implying its strict policy of currency intervention to prevent
excessive appreciation in the franc may no longer be required.
"The fact that the SNB have said deflationary risks have all
but disappeared for now is very bullish for the franc as
deflationary risks were associated with intervention risk," said
Audrey Childe-Freeman, senior currency strategist at Brown
Brothers Harriman.
The euro <EURCHF=> fell from around 1.3877 francs to a
session low of 1.3759, bringing the all-time low of 1.3731. hit
on June 9, into focus. The dollar <CHF=> fell to a one-month low
of 1.1128 from around 1.1315 francs.
The dollar was down around 0.4 percent versus a currency
basket <.DXY> as European stocks <> and U.S. equity
futures <.SPc2> traded in positive territory.
