FOREX-Euro recovers vs dollar; Greece worries persist

Tue Feb 16, 2010 4:24am EST

* Euro rises vs dollar; traders eye Eurogroup meeting

* Aussie gains after RBA minutes; also helps euro

* Greek uncertainty caps gains; German ZEW at 1000 GMT

(Updates prices, changes byline, dateline; previous TOKYO)

By Jessica Mortimer

LONDON, Feb 16 (Reuters) - The euro rose against the dollar on Tuesday, recovering after recent losses as investors concluded that much of the bad news on Greece's public finances was priced in and took the opportunity to take profits.

But sentiment towards the single currency remained broadly negative on uncertainty that Greece's debt problems will be resolved quickly and traders said the euro remained vulnerable to further falls.

Euro zone states urged Greece on Monday to take further steps to control its budget deficit by mid-March if needed, but did not elaborate on last week's pledge to defend the country if market pressures spin out of control. [ID:nLDE61E29L]

Traders said the statements did little to instil confidence that Greece's problems will be resolved soon, and investors will be watching for any developments as European Union finance ministers meet on Tuesday.

"As the market realises that most of the move lower in euro/dollar has already been done we are now seeing a bit of profit-taking and a bit of a relief rally," said Lauren Rosborough, currency analyst at Westpac.

At 0901 GMT, the euro EUR= was up 0.5 percent on the day against the dollar at $1.3663. It remained weak but so far this week has stayed above Friday's nine-month low of $1.3532.

Traders said the euro was also helped higher against the U.S. dollar in tandem with the Australian dollar and other perceived riskier currencies after Australia's central bank signalled further gradual raise rates. [ID:nSYC002309]

The market also awaited the German ZEW institute's economic sentiment index at 1000 GMT, which is expected to fall to 42.0 from 47.2 previously.[DE/ECI]

The euro has shed nearly 10 percent against the dollar since late 2009 on worries over whether Greece can service its debt. Uncertainty about the fiscal health of Greece and other euro zone countries, such as Portugal, are expected to keep the euro under pressure.

"Markets are in a state of fatigue at the moment. There is a lack of fresh news and what news there is has already been priced in," said UBS currency strategist Geoffrey Yu.

"We will have to see what comes out of the Ecofin meeting," he said, adding that if there is nothing new it could be seen as a reason to resume selling the euro, and that currency markets were likely to take their cue from government bond movements.

SHORT POSITIONS

The latest data from the Commodity Futures Trading Commission showed currency speculators ran up a record short euro position in the week to Feb. 9. [ID:nN12122806]

"The market had sold the euro up to their chins before the meeting (of finance ministers), and some people are moving to trim those positions," said a senior trader for a Japanese bank in Tokyo.

"But the euro lacks its own buying factors. So this euro gain looks very fragile," he added.

The dollar index .DXY =USD was down 0.3 percent at 80.109, below a seven-month high of 80.748 hit late last week.

The RBA minutes showed the central bank decided to skip a rise in interest rates this month to better assess the impact of past hikes at home and the effect of sovereign debt stress abroad, though further gradual tightening was likely to keep inflation contained over time.

The Australian dollar AUD=D4 climbed 0.7 percent to $0.8948. These gains, combined with broad negative sentiment towards the euro, pushed the single currency EURAUD= to a decade low against the Australian dollar.

Against the yen, the euro EURJPY=R gained 0.4 percent to 122.90 yen, while the dollar JPY= fell 0.1 percent to 89.91 yen.

(Additional reporting by Satomi Noguchi in Tokyo)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.