* Euro under pressure but above 11-mth trough
* Investors await EU finmin call at 1430 GMT
* Euro hurt by European ratings downgrade fears
By Lisa Twaronite
SYDNEY, Dec 19 The dollar bounced against
major rivals in Asia on Monday, as uncertainty following news of
North Korean leader Kim Jong-il's death increased the U.S.
unit's safe-haven appeal.
North Korean state television reported the demise of the
leader of the reclusive nation, which had begun the process of
transferring power to his son Kim Jong-un.
Against its Japanese counterpart, the dollar bought 78.15,
up from around 77.86 yen shortly before the news of Kim's
death. The dollar index was at 80.420, up from 80.303
before the news but down from a session high of 80.317 and below
last week's 11-month peak.
The euro, hurt by fears of European sovereign ratings
downgrades, remained under pressure after its worst weekly
performance in three months.
The single currency stood at $1.2999, down from a
high of $1.3049 hit early in the Asian session but off an
11-month low of $1.2944 hit last week. A trader at a major
Japanese bank cited stops placed below its immediate support at
Resistance lies at $1.3090, which would be a 50 percent
retracement of its recent move from $1.3236 to $1.2944. Another
key barrier lies at $1.3125-45.
Short-covering could also underpin the currency. IMM data
released on Friday showed net short positions in the euro
against the dollar totaled 116,457 as of Dec. 13, following a
disappointing EU Summit.
"With such large short positions, it's very possible that
the euro could get a brief lift on shortcovering in thin
conditions ahead of the end of the year, even though pressure
remains from the downgrade concerns," said Koji Fukaya, chief
currency analyst at Credit Suisse in Tokyo.
For now, investors are likely to focus on a euro zone
finance ministers teleconference call from 1430 GMT about the
draft text of a new fiscal compact agreed earlier this month.
Talks will also include the size of individual bilateral loans
to the International Monetary Fund.
The European Central Bank is preparing this week to prop up
euro zone lenders with three-year low-price loans to revive the
struggling interbank lending and funding market.
Banks could take an estimated 250 billion euros ($326.2
billion) at the first auction of the three-year loans on
Wednesday. Some hope the banks will use the funds to buy EU
sovereign debt and pull yields down. Any sign of improving
credit conditions in the euro zone would provide support for the
The euro remains highly vulnerable to more EU ratings
downgrades as France faces up to a double-notch cut by Standard
& Poor's which put a raft of European nations on review earlier
Investors are already positioning for the worst, traders
"As soon as the announcement comes out, there will be a
short-term negative impact but it's all baked in the cake for
Europe," said David Scutt, a trader at Arab Bank Australia.
But some analysts say the European unit has even more room
to fall next year.
Nomura Securities recommends booking profits for now, in the
wake of the euro's 3 percent drop last week, solid bond auctions
in Italy and Spain and a narrowing in spreads on the bonds of
Belgium and France, but it forecasts the euro will fall as low
as $1.2000 by the end of the first quarter of 2012.
On Friday, Moody's cut Belgium by two notches to Aa3 from
Aa1, citing risks to economic growth and the costs of bailouts
of banks such as Dexia.
This came in addition to Fitch's warning it could may
downgrade France and six other euro zone countries as it
believes that a comprehensive solution to the region's debt
crisis is "technically and politically beyond reach."
The Australian dollar eased to $0.9902 from $0.9922
shortly before the news of Kim's death, and was down from
$0.9987 in late New York trade on Friday.
The Aussie lost 2 percent last week but did manage to bounce
from lows around $0.9862, with support seen around $0.9862 with
resistance at $1.0052.