June 11 (Bloomberg) -- The euro pared gains against the dollar as Spain's bailout spurred concern that the sovereign- debt crisis is deepening as it spreads among indebted nations before Greek elections June 17. The 17-nation currency touched a two-week high after Spain asked for as much as 100 billion euros ($126 billion) to save its banking system, making it the fourth member of the currency bloc to seek a rescue. The bailout helped move Italy to the frontline of the crisis, as bets increased Europe's third largest economy may be the next one to succumb. The dollar and yen fell on decreased demand for refuge assets as shares rallied. Norway's krone strengthened as consumer prices rose more than economists forecast last month. The bailout "was not nearly as revolutionary as the market originally thought and that's why you're seeing a natural deflation in enthusiasm," said Boris Schlossberg, director of research at online currency trader GFT Forex in New York. "The much greater risk is, what does this mean for the balance sheets of Southern Europe in general?" The euro strengthened 0.2 percent to $1.2541 at 9:44 a.m. New York time. It earlier climbed as much as 1.2 percent to $1.2671, the highest since May 23 and the biggest intraday advance since Nov. 30. The euro added 0.2 percent to 99.66 yen after rising as much as 1.5 percent. The dollar was little changed at 79.47 yen. Dollar Measure The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, slid 0.3 percent to 82.268 as demand for safer assets waned. The euro's advance came after futures traders increased net bets against the shared currency versus the dollar to a record high for a fifth straight session last week. So-called net shorts rose by 11,003 to 214,418 contracts for the period ended June 5, Commodity Futures Trading Commission data showed. The 14-day relative strength index for the euro versus the dollar rose above 30 on June 4 for the first time in 10 days, ending the longest streak since 2008. When the index moves below 30 it indicates an asset's decline may have been overdone. The gauge reached 41 today. Currencies of countries tied to global economic growth rose as stocks advanced. The Standard & Poor's 500 Index added 0.3 percent. New Zealand's dollar gained 0.5 percent to 77.43 U.S. cents and Australia's dollar added 0.3 percent to 99.41 S.S. cents. The British pound gained 0.5 percent to $1.5544 and added 0.3 percent to 80.67 pence per euro. "While the U.K. has its own intractable problems and a pretty weak economic environment, it probably still looks if you want to remain in Europe it's a slightly better bet than the euro," said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. "There are still plenty of risks out there as far as the euro is concerned, so it's still a case of markets looking to sell rallies." Seven months after winning a landslide victory, Spanish Prime Minister Mariano Rajoy was forced to abandon his bid to recapitalize banks without external help. The bailout loan will be channeled through the state's bank-rescue fund, known as FROB, and extended to lenders that need it, Economy Minister Luis de Guindos Jurado said in Madrid on June 9. Euro Path The European currency has fallen 3.9 percent in the past six months, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has gained 3.3 percent and the yen is 0.7 percent stronger. Spanish and Italian 10-year bonds fell for a fourth day, reversing earlier gains. The Spanish yield rose 21 basis points to 6.42 percent, while the rate on the Italian securities climbed 24 basis points to 6.01 percent.

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