By William L. Watts and V. Phani Kumar, MarketWatch FRANKFURT (MarketWatch)—The U.S. dollar gained ground Thursday, while the euro erased an earlier gain scored after Spain’s well-received auction of government debt that temporarily eased worries over the euro-zone debt crisis. The ICE dollar index DXY +0.21% , which measures the U.S. currency against a basket of six other major units, stood at 79.81, up from around 79.600 late Wednesday in North American trading. The euro EURUSD -0.20% traded at $1.3084, down from $1.3115 late Wednesday. The shared currency had jumped to around $1.3150 after Spain sold 2.54 billion euros of 2- and 10-year government bonds. The total amount sold exceeded the top end of the government’s planned range: €2.5 billion. Borrowing costs rose, as expected, but demand remained strong, analysts said. Read about Spain’s auction. “The initial response to the bond results was relief with a mildly positive bias that has since been followed by the overriding sense that Spain’s predicament remains unchanged,� said Lauren Rosborough, currency strategist at Société Générale. Meanwhile, the yen weakened against the U.S. dollar after Japan swung back to a trade deficit in March, with the greenback little-changed against the euro ahead of a keenly awaited Spanish debt auction later in the day. The greenback USDJPY +0.35% rose to ¥81.68 from ¥81.21 Wednesday. The rise came after data released earlier in the day showed a trade deficit of ¥82.6 billion in March compared with a surplus of ¥170.9 billion in February, albeit smaller than the ¥223.1 billion shortfall expected in the monthly trade balance by economists. Read more about Japan’s trade balance. Some analysts said that although the yen has recovered recently from the decline suffered last month amid expectations for monetary easing by the Bank of Japan, further depreciation can’t be ruled out. “The bottom line is that the pullback in the [dollar-yen pair] is unlikely to last beyond the short term,� Mitul Kotecha, head of global foreign exchange strategy at Crédit Agricole, wrote in a report. “Speculative investors in particular continue to position for [yen] weakness, with positioning close to multiyear lows, and although such investors have been wrong-footed over recent weeks, we believe the bets will eventually pay off,� he said. The drop also came after Bank of Japan Gov. Masaaki Shirakawa was quoted in reports as saying that the central bank is committed to further monetary easing. The euro EURJPY +0.14% , meantime, was buying ¥106.89, compared with ¥106.38 Wednesday. Among other major currency pairs, the British pound GBPUSD +0.06% was trading at $1.6016, down slightly from $1.6021 Wednesday. William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.

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