SPAIN EXTENDS RESERVE REQUIREMENT The Bank of Spain has extended the reserve requirement for banks to their convertible peseta funds in an attempt to curb speculation in short-term capital which is currently fuelling money supply growth. In a statement issued late last night, the central bank said convertible peseta accounts, funds which are not subject to exchange controls, would also be subject to a 19 pct reserve requirement with effect from Friday. Convertible peseta funds had been previously exempt from reserve requirements. The measure comes one week after the central bank raised reserve requirements on domestic deposits by one percentage point to 19 pct, also with effect on Friday. Banking sources say the high real interest rates on offer now -- around eight pct for overnight funds -- have attracted a large influx of speculative foreign capital which is threatening the government's monetary targets. They say this influx is largely responsible for Spain's principal measure of money supply, the broad-based liquid assets in public hands (ALP), to have grown by an estimated 17 pct annualised rate in February, compared with January's 8.3 pct rise and an 11.4 pct rise during the whole of 1986. The target for 1987 is eight pct. The Bank of Spain today did not provide assistance funds to banks in a move to drain excess liquidity from the money market. Liquidity will be further tightened by the fortnightly Treasury Bill auction tomorrow and Friday's hike in reserve requirements, expected to absorb over 200 billion pesetas from the system. The immediate reaction was a hike in interbank interest rates today to 13.75/14.00 pct from yesterday's 13.46 pct average for deposits. Bank of Spain officials said this was an understandable response "given that the market is short of funds." But banking sources noted that a continued rise in interest rates would neutralize the central bank's attempts to curtail short-term speculation with foreign funds by making the Spanish money markets more attractive.