FOREX-Euro and Aussie regain footing after sell-off
* Euro inches up after falling overnight on weak data
* Single currency in consolidation phase -analyst
* Aussie rebounds on short-covering
By Masayuki Kitano
SINGAPORE, Sept 21 (Reuters) - The euro edged higher on Friday, clawing back some ground lost the previous day on weak euro zone manufacturing and services data, and some analysts said the single currency could consolidate around current trading levels.
The euro rose 0.2 percent to $1.2998 after having fallen to as low as around $1.2920 the previous day.
Immediate support is seen near $1.2905, the 23.6 percent retracement of its rally from a two-year low of $1.2042 hit in late July to a four-month high near $1.3173 hit on Monday.
For now, the euro seems to be in a consolidation phase rather than being on the cusp of returning to a bearish trend, said Roy Teo, senior FX strategist for ABN AMRO Bank in Singapore.
"I think the euro should find some support around the $1.2755 level," he said. A drop below that support could open the way to a deeper drop, but as long as it holds, the euro could rise toward a peak hit in May of $1.3284, he said.
The European Central Bank's bond-buying plan and the Fed's launch of a new asset buying programme have given a boost to the euro this month. Signs of persistent weakness in the euro zone economy, however, have taken some of the shine off of the euro's recent rally.
A fall in Markit's composite euro-zone purchasing managers index on Thursday showed the ECB's aggressive new bond-buying plan has so far failed to inspire any major improvement in business at ailing euro zone companies.
"From here we continue with the waiting game and we just see what happens in Europe," said Gareth Berry, G10 FX strategist for UBS in Singapore.
"Two key questions. When is Spain going to ask for help, and will Greece be given the time and the money to effectively disappear off the radar screens for another six months or so," he added.
Negotiators discussing Greece's bailout came closer to an accord in late night talks on Thursday but are still short of a final deal that would unlock the next instalment of Greece's 31.5 billion-euro bailout package.
Many market players expect Spain to eventually apply for aid and trigger the ECB's bond-buying programme aimed at lowering the borrowing costs of stressed euro zone states, although investors' patience could be tested if Madrid dithers.
The Australian dollar also climbed as investors trimmed bearish bets against the currency, rising 0.4 percent to $1.0476 .
The Aussie dollar dropped as low as $1.0367 the previous day, hurt by a survey showing China's factory activity remained sluggish. China is Australia's single biggest export market.
The U.S. dollar eased 0.2 percent to 78.14 yen, well below a one-month high of 79.23 yen hit on Wednesday after the Bank of Japan boosted its asset-buying programme to help fuel the country's economic recovery.
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