* Spanish bond auction eases worries about debt woes
* Stop-losses on short positions triggered through $1.2360
* Swiss franc up, SNB omits pledge to curb currency rise
* Yen up on weaker-than-expected Philly Fed, claims data (Updates prices)
By Steven C. Johnson
NEW YORK, June 17 (Reuters) - The euro hit a three-week high above $1.24 on Thursday after a Spanish bond auction soothed worries about the country's finances, while worse-than-expected U.S. data weighed on the dollar.
The Swiss franc also rallied after Switzerland's central bank backed off its pledge to fight excessive currency strength now that deflation risks have receded. For details, see [ID:nLDE65E1W2]
Spain's 10-year government bond sale had decent demand and provided new opportunities for traders to buy the euro. The currency's move through an important technical level at $1.2360 triggered automatic buy orders and another bout of short-covering that pushed the euro above $1.24 for the first time since late May.
But the euro had retreated to $1.2386 by early afternoon EUR=, up 0.7 percent, after hitting $1.2413 earlier. Analysts said some were still anxious about the results of bank stress tests the Spanish central bank said would be published soon. [ID:nLDE65F1X2] [ID:nLDE65F1AL
Also, a decline in the Philadelphia Federal Reserve's mid-Atlantic manufacturing index and a rise in first-time jobless claims dulled market risk appetite and boosted the yen. The dollar fell 0.5 percent to 90.96 yen JPY= and the euro EURJPY= rose 0.1 percent to 112.70 yen. [ID:nN17254724]
"Philly Fed was slightly weaker than expected and that's contributed to equities turning around and the pretty significant gain in the yen," said John Doyle, senior currency strategist at Tempus Consulting in Washington. "In the near term it causes some worry about the U.S. growth outlook."
The euro fell 1.1 percent to 1.3773 Swiss francs after the SNB backed away from intervention, leaving it near a 1.3731 record low hit on June 9, according to Reuters EURCHF=. The dollar fell 1.7 percent to 1.1113 francs CHF=.
EURO RISKS REMAIN
Against the dollar, the euro has regained more than 5 cents from a four-year low of $1.1876 set on EBS last week, though it remains more than 13 percent lower in 2010.
The euro rose along with investor spirits after Spain's bond action. The spread between Spanish government bond yields and benchmark German Bunds narrowed from a euro lifetime high after the auction.
Analysts at Action Economics said euro zone central banks were reportedly among the buyers, along with interest from a sovereign account.
European Union leaders also moved toward agreement Thursday on ways to strengthen budget discipline and economic policy coordination among the 27 member states to contain a euro zone debt crisis. [ID:nLDE65G0PN]
Technical analysts at Commerzbank said the euro's correction could continue toward resistance at $1.2445/1.2570 -- the 2009 low and the 38.2 percent retracement of the move down from April to June.
But worries remain about the long-term ability of Spain and other euro zone countries to finance themselves while cutting budget deficits. Spain ended up paying a borrowing premium on Thursday compared to its last 10-year debt sale in May.
"There are still worrying signs for Spain, particularly stresses in the Spanish bank funding market," said Lee Hardman, currency strategist at BTM-UFJ. "We think the euro rally is being driven by position adjustment rather than fundamentals."
(Additional reporting by Wanfeng Zhou in New York and Neal Armstrong in London; Editing by Andrew Hay)