* Dollar index hits 1-month low; eyes on 85 area
* Swiss franc hits new record high vs euro
* Yuan jumps to 1-month high vs dollar in NDFs
(Adds details, prices, changes byline)
By Wanfeng Zhou and Steven C. Johnson
NEW YORK, June 18 (Reuters) - The euro hovered near a
three-week high against the dollar on Friday and headed for its
best weekly gain in over a year as European leaders said they
would publish details about the health of European banks.
With markets a bit less anxious about Spain's public
finances after the country attracted buyers for a debt auction
this week, some analysts said the stress test results could
boost trust in Europe's banking system.
But others cautioned that signs of trouble in the sector
could put the brakes on euro gains snapping a rally that lifted
the currency some 2 percent against the dollar this week, its
best weekly performance since May 2009.
Bank stress tests "could be quite significant if they in
fact show that significant capital needs to be raised by some
of the major European banks," said Brian Dolan, chief
strategist at Forex.com in Bedminster, New Jersey. "The euro
zone is by no means out of the woods."
After hitting a three-week high above $1.24 Thursday, the
euro retreated to $1.2363 <EUR=>, down 0.1 percent on the day.
It was still rooted in a short-term uptrend that began after
hitting $1.1876 last week, its worst level since 2006. the
currency was 0.4 percent weaker at 112.21 yen <EURJPY=> while
the dollar was off 0.2 percent at 90.79 yen <JPY=>.
Anxiety about the fiscal health of euro zone countries has
eased a bit over the last week and encouraged investors to
unwind bets against the single currency.
"We're going to see whether the euro is going to sustain
these gains and press on toward $1.25," Dolan said. "But if we
see a move back below $1.2340-50, it looks like we might see
some end-of-week profit-taking."
BNP Paribas strategists see the euro's corrective rebound
running out of steam near $1.2525, saying data suggest euro
gains are "not backed by real money investment flows."
Analysts said already light trading activity Friday was
expected to dissipate further shortly after 2 p.m. when a World
Cup match between England and Algeria kicks off.
SWISS, CHINESE CURRENCIES GAIN
The euro slid to a record low <EURCHF=> at 1.3718 Swiss
francs, according to Reuters data, while the dollar hit a
one-month low of 1.1081 francs <CHF=>.
The franc gained after Switzerland's central bank on
Thursday backed away from a pledge to fight currency strength
and said deflation risks have receded. []
The dollar index <.DXY> was flat at 85.737, after falling
to a one-month low at 85.453. Technical analysts said it looked
vulnerable after breaking through support at 85.85, with the
next key level seen in the 85.13 area, its May 21 low.
The Chinese yuan rose to a one-month high against the U.S.
dollar in offshore forwards as investors bet China may
eventually cave in to growing pressure from the U.S. Congress
to let the yuan rise in value. []
Benchmark one-year non-deliverable forwards <CNY1YNDFOR=>
fell as far 6.6780. That implied investors were betting on a
2.2 percent rise in the yuan against the U.S. dollar over the
next year, up from bets of a 1.3 percent gain on Thursday.
But Brown Brothers Harriman strategist Marc Chandler said
Washington likely "lacks the leverage to get China to do
something that it does not want to do." See analysis
[].
After the 2007-2009 financial crisis and the current
European sovereign debt crisis, China can argue "it is a
distraction to focus on the yuan," Chandler said.
(Additional reporting by Tamawa Desai in London; Editing by
)
