RTRS: Sterling near two-week high as euro seen vulnerable
* Euro seen vulnerable as Spain, Greece concerns persist
* Pound likely to get boost from EU farm subsidy payments to UK
* Sterling trades within sight of 13-month high versus dollar
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By Nia Williams
LONDON, Sept 25 (Reuters) - Sterling retreated after hitting its highest level in more than two weeks against the euro on Tuesday, but looked set to hold firm amid continuing uncertainty over whether Spain will seek a sovereign bailout.
Reports that Bundesbank lawyers were checking the legality of the European Central Bank's bond-buying plan and concerns about Greece's failure to hit the targets under its own international rescue limited the euro's recovery.
The single currency was last close to flat at 79.75 pence, after hitting a low of 79.36 pence earlier in the session, its lowest level since Sept. 7.
Technical support for the euro was seen around the 50- and 55-day moving averages at 79.11 and 79.07 pence respectively.
The European Central Bank's plan to ease the region's debt crisis by buying indebted countries' bonds has supported the euro in recent weeks, but the plan cannot be implemented until a country requests a bailout.
"There's a realisation that what the ECB has done has been significant but it has not got rid of the crisis," said Jane Foley, senior currency strategist at Rabobank.
With no UK data released on Tuesday, investor focus was firmly on developments in the euro zone.
Some strategists said although the euro was vulnerable to short-term shifts in sentiment, investor appetite for perceived risk currencies had improved since the ECB announced its bond-buying plan and the U.S. Federal Reserve unleashed another round of monetary easing earlier this month.
Better risk sentiment could see sterling retreat further from the near four-year high of 77.56 pence against the euro that it hit in June.
"The pound has been trading as a relative safe haven from the euro zone debt crisis. If these safe haven flows were to start to ease it could leave the pound more vulnerable to the continued economic weakness in the UK," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi.
The UK economy is in its third quarter of recession, although recent data has suggested the economy may be rebounding.
The pound was also lifted by talk of farm subsidy payments due later in the week, which the European Union makes to the UK once a year. The subsidy could create three billion pounds of sterling-supportive flow, market players said.
Against the dollar, sterling rose 0.1 percent to $1.6235 , holding within sight of a 13-month high of $1.6310 hit last week.
