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FOREX-Italy downgrade keeps euro pinned near 2-yr lows – Reuters news and update details. I hope you will find useful information for making trading decision today.
* Moody's cuts Italy by 2 notches ahead of debt sale * Euro hovers near previous day's 2-year low vs dollar * Aussie dollar supported as China's GDP meets expectations By Anirban Nag LONDON, July 13 (Reuters) - The euro slipped towards two-year lows on Friday after a Moody's downgrade on Italy that added to an already bearish stance on the single currency, while commodity currencies rose on growth figures from China that met expectations. The euro fell to $ 1.2190, not far from a two-year trough of $ 1.2166 hit on trading platform EBS the previous day and on track for its second straight week of losses. It fell to $ 1.2181 in the Asian session after Moody's cut Italy's credit rating by two notches. Moody's warned it could further cut the new Baa2 rating, which stands just two notches above junk, if Italy's access to debt markets dried up. The timing of the downgrade was particularly bad, coming hours before Italy heads to the debt market to raise 5.25 billion euros in bonds with maturities of up to 11 years. A huge jump in yields could exert pressure on the euro as it would fuel the risk of debt contagion in the euro zone. "The Italian downgrade means demand from international investors for the bonds on auction today will suffer," said Beat Siegenthaler, currency strategist at UBS. "While there is a risk of a short squeeze that could push the euro higher, we expect more selling into a bounce. We also expect the ECB to lower rates and launch unconventional measures in coming months, all of which will keep the euro under pressure." Near-term support for the euro is expected around $ 1.2151, the June 29, 2010 low, with another support level around $ 1.1876 a low struck on June 7, 2010. There was some talk of an option barrier in the euro at $ 1.2150. That suggests options players would bid for the euro if it drops close to that level, offering the single currency some support. The euro has lost 5.7 percent so far this year, already exceeding the losses it chalked up in 2011, with losses accelerating after last week's deposit and refinance rate cuts by the European Central Bank (ECB). The unprecedented cut to zero in the deposit rate means banks will earn nothing for parking excess funds with the ECB, and it will encourage investors to sell the low-yielding euro and buy higher-yielding riskier currencies. Traders expect 800 billion euros that banks used to park with the ECB would start leaving the euro zone in the hunt for better yields. Analysts said the deposit rate cut also meant the euro had become the funding currency of choice for higher-yielding assets. This left the euro vulnerable in times of both improving and deteriorating market sentiment. CHINESE GROWTH While the euro hovered near two-year lows against the dollar, the Australian dollar rose 0 .3 percent to $ 1.0169 , boosted by data showing that China's economy grew 7.6 percent in the second quarter from a year earlier. China's economic health is always a key driver for Australia because the Asian powerhouse is Australia's single largest export market. Though the lowest reading in three years, it was exactly in line with expectations and came as a relief to investors, who had been worried about the risks of a weaker result especially at a time when activity in the U.S. and Europe is slowing. "I don't think there is much need to worry about China, which is a country that can afford to implement fiscal measures quickly," said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo. "I think a soft landing would be the most reasonable expectation about the outlook." The safe-haven dollar held near a two-year peak hit against a basket of major currencies the previous day. The dollar index stood at 83.640, having climbed to 83.829 on Thursday, the highest level since July 2010. Against the yen, the dollar held steady at 79.28 yen.