FOREX-Euro falls as Spanish debt worries resurface
* Spanish banks' reliance on ECB stokes fears on debt crisis * Disappointing China GDP weighs on risk sentiment * Euro off for second week against dollar, yen By Luciana Lopez NEW YORK, April 13 (Reuters) - The euro fell on Friday, sliding for a second straight week against the dollar and the yen as rising Spanish borrowing costs spooked investors already reluctant to hold the single currency over the weekend. Investors reaced to news that Spain's banks are virtually locked out of credit markets and relied heavily on cheap loans from the European Central Bank in March, and the cost of credit default swaps on Spanish debt to a record high. The worries over Europe's lingering debt crisis fed anxiety over the global economy after data showed China's economy grew less than expected in the first quarter. "We're going into the weekend with market players averse to holding euros," said Michael Woolfolk, senior forex strategist with BNY Mellon in New York. "I think the way you play that is you're either neutral or short euros over the weekend and you see what next week brings." The single currency has been mostly range-bound in recent weeks as upcoming euro zone elections, including in Greece and France, and mixed global economic data have kept investors in a wait-and-see mode. Among key data next week will be U.S. retail sales for March, due on Monday, which could shed light on whether rising gas prices are crimping consumer spending. The euro fell 0.80 percent to $1.3080 on Friday, eroding the slight advance versus the dollar previously seen for the week. For week, the single currency was last off 0.15 percent against the greenback. Against the yen, the euro was off 0.53 percent at 106.04 yen , down 0.74 percent for the week. "The euro zone situation is slowly flaring up again, and that can have some people second-guessing how many euros they want to hold," said Sean Incremona, an economist at 4cast Ltd in New York. The dollar's gains were broad-based, with the greenback rising 0.94 percent against the traditional safe-haven Swiss franc to 0.9195 franc. Against the yen, the dollar was up 0.22 percent at 81.06 yen. "We are seeing the traditional reaction in that stocks are selling off, core bond markets are rallying, the dollar is rallying and commodities are getting hit," said George Davis, chief technical analyst at RBC Capital Markets in Toronto. Investors could stay more pessimistic over the next few weeks, he said. Uncertainty about the euro, however, has fallen as reflected in the options market, with three-month risk reversals in the euro/dollar still biased for euro puts, trading at -2.1 vols on Thursday, but improving from -3.5 vols in mid-February. AUSSIE PRESSURED The Australian dollar, which reacts strongly to Chinese data because Australia's commodity-driver economy relies heavily on Chinese demand, fell as low as US$1.0352. The Aussie had gained 1.2 percent on Thursday on a surprisingly strong local jobs report and solid bank lending data from China. "We view yesterday's strong Australian employment and Chinese loan data as more important than the overnight Chinese Q1 GDP release and hence see the overnight sell-off in AUD as providing good levels to go long," Nomura analyst Geoff Kendrick said in a note.