* Euro falls, stop-loss orders triggered below $1.33
* Italy auction solid but market nervous on Spain
* Yen firms as equity markets slide
By Neal Armstrong
LONDON, March 29 (Reuters) - The euro fell against the
dollar and the yen on Thursday as concerns about contagion from
the euro zone debt crisis resurfaced, with investors wary on the
common currency ahead of Spain's budget on Friday.
Traders said automatic stop-loss sell orders were triggered
on the euro's break below $1.33 after the European Commission's
economic sentiment index dipped by 0.1 percent, with sentiment
in industry worsening markedly.
Despite decent demand at an auction of Italian five- and
10-year bonds, Italian and Spanish yields rose, dragging the
euro to a session low of $1.3267.
Analysts said the euro was unlikely to break below its
recent range of roughly between $1.30 and $1.35, with market
players expecting a euro zone finance ministers' meeting to
approve bolstering the region's rescue fund on Friday.
"Given we are below $1.33 this is certainly a
psychologically important mark which may be the beginning of a
more sustained down move," said Caroline Hecht, currency
strategist at Commerzbank.
"If euro zone finance ministers decide the rescue package
will be enlarged that will be calming for the market but we
expect the risk premia on peripheral countries' yields to remain
quite high."
Expectations over the size of the rescue fund have been
tempered by European Central Bank governing council member and
Bundesbank chief Jens Weidmann who warned that raising the
firewall around stricken euro zone members would only buy
time.
But the shared currency remained vulnerable to concerns of
contagion spreading to the euro zone's larger economies, and a
general strike in Spain and the Spanish budget on Friday fanned
bearish sentiment.
"If the Budget delivers any negative surprises or is not
considered sufficiently tough enough to reign in Spain's budget
deficit, then international investors could ditch Spain all
together," said Kathleen Brooks, research director at FOREX.com.
YEN FIRMS BROADLY
The euro fell over 1 percent on the day to 109.00 yen
, with the Japanese currency gaining broadly on demand
linked to the end of Japan's financial year and as European
equity markets followed Asian bourses into negative territory.
A second straight day of losses in Chinese stockmarkets and
a below-forecast increase in new orders for U.S. durable goods
on Wednesday knocked appetite for risk, and contributed to
demand for the safe-haven and low-yielding yen.
The last day for spot trading in the business year to March
31 was on Wednesday but real-money flows from Tokyo kept major
currencies under pressure against the yen, with exporters
selling the dollar in large amounts, market players said.
The dollar was down 0.8 percent at 82.20 yen,
triggering reported stop-loss orders on the break of 82.35/40.
But many strategists said the dollar should reassert itself
against the yen as long as upcoming U.S. data does not bear out
a recent rise in concerns about growth.
"There's definitely a lot of month-end and quarter-end
rebalancing but the bigger story we are seeing is some bond
buying and equity selling in the last 24 hours," said Geoff
Kendrick, currency strategist at Nomura.
"But assuming U.S. economic numbers next week are okay we
could see U.S. yields back up to the top of their recent range
and that could be very dollar/yen supportive."
In general, U.S. data prior to the durable goods numbers had
been heading in the right direction, but those latest figures,
allied to a warning from Federal Reserve chief Ben Bernanke,
have prompted nerves over the strength of the U.S. recovery.
U.S. initial jobless claims and a final reading of final
quarter 2011 GDP were scheduled for 1230 GMT on Thursday.
The dollar index reversed earlier losses to rise 0.15
percent to 79.236, above a four-week low of 78.77 hit Tuesday.
