Euro perks up on Greek hopes, yen sags

SYDNEY (Reuters) - The euro clung to overnight gains in Asia on Friday, having risen on hopes that Greece was close to clinching a second bailout package, while improved risk appetite knocked the yen lower across the board.

The single currency stood at $1.3132, after bouncing off a three-week trough around $1.2973. It found good support at $1.2975, the 50 percent retracement of the $1.2623-1.3321 move.

Traders said any positive news out of Greece could see the euro pop back above $1.3300 to re-test the two-month peak of $1.3321 set on Feb 9.

BNP Paribas analysts said there is scope for further short-covering in the euro into Monday's EU Finance ministers meeting.

"Given the serial experience of deadlines being missed and hopes dashed, we would judge that there is still ample scope for Thursday's short covering rally to extend should we get confirmation of a Greece deal on Monday," they wrote in a note.

Hopes have risen that Greece has finally done enough to secure a second bailout after Athens set out extra budget savings demanded by its international lenders.

In a further sign of an emerging agreement, euro zone sources said national central banks in the currency bloc would exchange holdings of Greek bonds this weekend in the run-up to a private sector debt deal to avoid taking forced losses.

Against the yen, the euro reached a two-month high of 103.82, before ceding a bit of ground to last trade at 103.60.

Renewed euro strength, coupled with upbeat U.S. data knocked the dollar index .DXY down 0.4 percent to 79.370.

Data on Thursday showed the number of Americans filing for new unemployment benefits unexpectedly fell to a near four-year low last week, suggesting the labor market recovery was quickening.

The safe-haven yen also struggled. It was already hampered by the Bank of Japan's move earlier in the week to boost its asset-buying program and maintain zero rates until 1 percent inflation is foreseen.

The BOJ action has made the yen the funding currency of choice for carry trades, traders said.

The dollar came within a hair's breadth of 79.00 yen, the highest level since the massive yen-weakening intervention in October. A break above the intervention high around 79.55 will pave the way for more gains, traders said.

The yen lost even more ground against higher-yielding currencies like the Australian dollar, which jumped to a six-month peak near 85.00 yen.

That also helped the Aussie gained on the greenback. It pushed back above $1.0750, rebounding strongly from Thursday's low of $1.0646 and keeping intact its uptrend channel from December.

There is little in the way of major economic news out of Asia on Friday. In the United States, consumer inflation data for January is due, while investors will get the latest reading on Chinese house prices on Saturday.

(Additional reporting by Reuters FX analyst Krishna Kumar)