By: Barbara Zigah

The common currency Euro clawed for gains in Asian trading today, coming off a newly struck 16-month low, but analysts say that gains will be capped as Spain’s sovereign debt auction looms. The Spanish auction, and tomorrow’s by Italy, are seen as a confidence test for the Eurozone’s ability to meet funding needs. As reported at 11:57 a.m. (JST) in Tokyo the Euro was trading 0.2% higher at $1.2725, getting a bounce from support pegged at $1.2700. During the overnight hours on the EBS trading platform, the EUR/USD pair had struck $1.26615. The Euro also gained 0.2% against the Japanese Yen, rising off a low of 97.67 Japanese Yen struck earlier in the session.

Later today, the European Central Bank will conclude its policy setting meeting, and investors are keen to hear what the officials have to say. Yesterday, echoing the call for analysts and economists throughout the world, Fitch’s credit ratings agency urged the central bank to take a larger role in shoring up the Eurozone’s problematic nations, citing Italy as an example in order to prevent the Euro’s “cataclysmic” collapse. The ECB has long maintained that their role is not as the lender of last resort and that their asset purchases would not be infinite.