* Spanish bond auction eases worries about debt woes
* Stop-losses on short positions triggered through $1.2360
* Swiss franc up, SNB omits pledge to curb currency rise
* Yen up on weaker-than-expected Philly Fed, claims data
(Updates prices, adds details, comment; changes byline)
By Steven C. Johnson
NEW YORK, June 17 (Reuters) - The euro hit a three-week
high on Thursday above $1.24 after a Spanish bond auction
soothed worries about the country's finances and
worse-than-expected U.S. data weighed on the dollar.
The Swiss franc also rallied after Switzerland's central
bank backed off its pledge to fight excessive franc strength
now that deflation risks have receded. For details, see
[]
Spain's 10-year government bond sale had decent demand and
provided new opportunities for traders to buy the euro. The
currency's move through an important technical level at $1.2360
triggered automatic buy orders and another bout of
short-covering that pushed the euro above $1.24 for the first
time since late May.
But the euro had retreated to $1.2362 by early afternoon
<EUR=>, up 0.4 percent, after hitting $1.2413 earlier.
Analysts said some were still anxious about the results of bank
stress tests the Spanish central bank said would be published
soon. [] [
Also, a decline in the Philadelphia Federal Reserve's
mid-Atlantic manufacturing index and a rise in first-time
jobless claims dulled market risk appetite and boosted the yen.
The dollar fell 0.7 percent to 90.81 yen <JPY=> and the euro
<EURJPY=> slipped 0.2 percent to 112.26 yen. [ID:nN17254724]
"Philly Fed was slightly weaker than expected and that's
contributed to equities turning around and the pretty
significant gain in the yen," said John Doyle, senior currency
strategist at Tempus Consulting in Washington. "In the near
term it causes some worry about the U.S. growth outlook."
The euro fell 1.2 percent to 1.3761 Swiss francs after the
SNB backed away from intervention, leaving it near a 1.3731
record low hit on June 9, according to Reuters <EURCHF=>. The
dollar fell 1.6 percent to 1.1133 francs <CHF=>.
EURO RISKS REMAIN
Against the dollar, the euro has regained more than 5 cents
from a four-year low of $1.1876 set on EBS last week, though it
remains more than 13 percent lower in 2010.
The euro rose along with investor spirits after Spain's
bond action. The spread between Spanish government bond yields
and benchmark German Bunds narrowed from a euro lifetime high
after the auction.
Analysts at Action Economics said euro zone central banks
were reportedly among the buyers, along with interest from a
sovereign account.
European Union leaders also moved toward agreement Thursday
on ways to strengthen budget discipline and economic policy
coordination among the 27 member states to contain a euro zone
debt crisis. []
Technical analysts at Commerzbank said the euro's
correction could continue toward resistance at $1.2445/1.2570
-- the 2009 low and the 38.2 percent retracement of the move
down from April to June.
But worries remain about the long-term ability of Spain and
other euro zone countries to finance themselves while cutting
budget deficits. Spain ended up paying a borrowing premium on
Thursday compared to its last 10-year debt sale in May.
"There are still worrying signs for Spain, particularly
stresses in the Spanish bank funding market," said Lee Hardman,
currency strategist at BTM-UFJ. "We think the euro rally is
being driven by position adjustment rather than fundamentals."
(Additional reporting by Wanfeng Zhou in New York and Neal
Armstrong in London; Editing by Andrew Hay)
