* Cenbanks' liquidity pledge triggers short-covering
* Soft US data keeps hopes of Fed easing alive
* Dollar index hits 3-week low,
* Euro looking better on charts, rises above Ichimoku kijun
* Yen gains after BOJ stands pat
By Hideyuki Sano
TOKYO, June 15 The euro held firm against the
U.S. dollar on Friday, reflecting hopes of central bank action
to counter potential fallout from Sunday's crucial election in
Greece, and after disappointing U.S. economic data.
G20 officials told Reuters that central banks from major
economies stand ready to take steps to stabilize financial
markets by providing liquidity and preventing a credit squeeze
if the Greek election result roils markets.
New claims for U.S. state jobless benefits rose for the
fifth time in six weeks and consumer prices fell in May, opening
the door wider for the U.S. Federal Reserve to further ease
These factors prompted unwinding of market players'
massively short positions on the euro, and drove the dollar to a
three-week low against a basket of currencies, though worries
about Spain's troubles in financing its debt remained in place.
The euro's latest rebound from its two-year low of $1.2280
on June 1 started after disappointing U.S. payroll data
rekindled speculation of another stimulus from the U.S. Federal
Although Chairman Ben Bernanke dropped no hint of an
immediate action when he spoke last week, hopes for more policy
steps were heightened after the UK government and the Bank of
England unveiled a 100 billion pound ($155 billion) funding
scheme for banks to boost credit on Thursday.
Thus the dollar slipped to its lowest level in three weeks
against a basket of currencies, with the dollar index
falling to as low as 81.703, a low since May 23.
Against the yen, the dollar fell 0.6 percent to one-week low
of 78.83 yen after the Bank of Japan announced no policy
change, though that is in line with market expectations.
But a further dollar further fall towards 78 yen is likely
to raise caution over Japan's intervention.
The euro rose 0.1 percent to $1.2644, extending
Thursday's 0.6 percent gains and edging near a high of $1.2672
hit right at the beginning of the week in a knee-jerk reaction
to the announcement of a plan to support Spanish banks.
While the outcome of the Greek election on Sunday is seen as
holding the key in the near term, the euro's technical outlook
is improving, analysts said.
On daily Ichimoku charts the euro rose above major
resistance from the kijun line, which stands at $1.2623 on
Friday, for the first time since it began declining in May.(The
kijun line is the mid-point between the highest high and lowest
low of a particular instrument.)
"I'm a bit impressed by the euro's charts today. We may be
approaching the time when we have to judge whether the euro's
recovery from its bottom on June 1 may become more solid," said
Teppei Ino, currency analyst at the Bank of Tokyo-Mitsubishi
Analysts at RBC Capital Markets said in report that a close
above resistance around $1.2625, its January low, is needed to
sustain the euro's corrective rebound.
NO EXIT AFTER ALL?
Traders agree that the euro has scope for further gains if
Greece's pro-bailout parties manage to win a majority in
But as speculators' net short positioning in the euro hit a
record high last week, some analysts say even if the leftist
coalition, which opposes the bailout, wins, the euro could be
"The initial reaction would be negative (for the euro.) But
what's likely to happen after that is a new government will keep
its commitment to the euro and start negotiating with
creditors," said Junya Tanase, chief currency strategist at
"In that case, those euro short positions that have been
stemming from fear of Greece's exit will have to be wound back,"
Euro zone officials said that the euro zone might consider
giving a new government in Athens some leeway on how it reaches
their austerity target.
Commodity-linked currencies also held firm on hopes of more
policy support for the global economy, with the Australian
dollar staying near a one-month high of $1.0034 hit on
Thursday. It last stood at $1.0025.