Yen hits one-week high vs dollar, two-week high vs euro
* BOJ eases policy, but some had expected more
* Euro up versus dollar as Spain Q3 GDP less bad than feared
* Italy debt auctions also help euro
* Volumes thin as giant storm closes U.S. market
By Nia Williams and Anooja Debnath
LONDON, Oct 30 (Reuters) - The yen rose broadly on Tuesday
after monetary easing steps from the Bank of Japan disappointed
some market players who had positioned for a more aggressive
increase in asset purchases.
The euro also gained against the dollar after data showed
the Spanish economy contracted slightly less than expected in
the third quarter and Italy's borrowing costs at a sale of five-
and ten-year debt.
Volumes were thin with U.S. markets closed as one of the
biggest storms ever to hit the United States battered the
eastern seaboard.
The BOJ increased its monetary stimulus for a second month
runinng, this time by 11 trillion yen ($138.5
billion). The yen gained after this, with traders
saying there had been speculation of a bigger stimulus.
"It was a very sceptical response to the BOJ policy meeting,
made worse by the fact they have revised lower the growth and
inflation outlook. That has seen the yen unwind a lot of the
softer tone we saw going into this meeting," said Jane Foley,
senior currency strategist at Rabobank.
The dollar hit a one-week low of 79.28 yen on EBS
trading platform, breaking below important chart support at the
200-day moving average at 79.52. It was last down 0.4 percent on
the day at 79.43 yen.
Friday's four-month peak of 80.38 was expected to act as
resistance for the dollar.
The euro also fell to a two-week low of 102.175
yen before paring losses to last trade down 0.1 percent at
102.87 yen.
SPAIN, ITALY NEWS LIFT EURO
The euro climbed 0.4 percent against the dollar to
$1.2935 as data showed the Spanish economy contracted for a
fifth straight quarter in the three months to September at a
slightly slower rate than forecast.
It was also helped by improved demand at an Italian debt
auction.
"There's been a little bit of speculative buying of
euro/dollar because the Spanish GDP data was not so bad as
feared," said Paul Bednarczyk, head of research at 4CAST.
In Madrid, Cortal Consors economist said any suggestion that
the GDP number marked an upturn for Spain was "a mirage".
Market players cited bids at $1.2850-80 which should help
limit any losses, and expected buying ahead of the 200-day
moving average at $1.2834.
"We are very much in a range trade at the moment of
$1.28-$1.32," Bednarczyk said.
Gains for the euro looked likely to be capped by concerns
about whether Greece can agree a deal on more austerity, and
uncertainty over when Spain might request financial aid.
Spanish Prime Minister Mariano Rajoy said on Monday he would
seek a credit line from the euro zone's rescue fund "when I
think it is in the interests of Spain".
Still, expectations the European Central Bank will start a
bond buying programme after Madrid asks for a bailout limited
speculative euro selling.
Traders reported option expiries at $1.2900 and $1.2925,
which could keep the euro close to those levels.
Strategists said it was too early to tell what impact the
destruction caused across the Atlantic by the giant storm Sandy
might have on currency markets.
Demand for the dollar tends to rise in times of reduced
appetite to take on risk, but if widespread damage prompted
speculation the Fed might ease policy further to shore up the
economy, the dollar could fall.
The U.S. dollar earlier hit a three-month high
against the Canadian dollar of C$1.0020 and broke back above
parity, seen as a key technical level.
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