* Euro steadies ahead of German court ruling
* Verdict originally planned for Wed but to be confirmed on
* Euro seen capped below 200-day moving average
* Fed seen more likely than before to embark on QE
By Hideyuki Sano
TOKYO, Sept 11 The euro hovered below a
near-four-month peak against the dollar on Tuesday as traders
grew wary after the currency's sharp gains late last week and
ahead of key events in Europe and the United States.
The euro traded at $1.2760, unchanged in early Asian
trade and off a high around $1.2815 hit on Friday just after
poor U.S job data raised expectations that the Fed will likely
launch another asset purchase programme on Sept 13.
For now, the euro faces major resistance from its 200-day
moving average, which stood at $1.2834 on Tuesday. The euro has
not been traded above that average for nearly a year.
"I tend to think that the euro is unlikely to rise
sustainably above the 200-day average. There are few reasons to
buy the euro above that level," said Makoto Noji, senior
strategist at SMBC Nikko Securities.
While the European Central Bank's announcement of a new bond
buying plan last Thursday - seen as aimed at helping
cash-strapped Spain - boosted risk appetite, there remain many
hurdles for the euro.
Germany's constitutional court had been set to rule
Wednesday whether Germany can legally participate in the euro
zone's permanent bailout fund, a vital decision as the ECB can
buy government bonds only in conjunction with the bailout fund.
Few market players expect the court to rule the fund
unconstitutional, but some think the judges could attach fresh
conditions on any future aid Germany may grant to other euro
Before that, though, following a fresh complaint from a
ruling party lawmaker against the ECB's bond buying, the court
is expected to decide on Tuesday whether to go ahead with its
rescue fund ruling on Wednesday or delay to consider the
Even if the court gives a green light to the bailout fund,
and therefore the ECB's bond buying plan, the euro remains
vulnerable to developments in Spain, which is expected to ask
for a bailout, and Greece, whose foreign lenders rejected parts
of an austerity package prepared by the government.
Spanish Prime Minister Mariano Rajoy said late on Monday
that he expected the European Union to set reasonable conditions
for Spain if the country sought a bailout but added no decision
on a bailout would be taken ahead of the Sept. 14-15 meetings of
euro zone and EU finance ministers.
"If Spain asks for help, it will have to tighten fiscal
policy and carry out structural reforms. That would be a thorny
path which could even cause social unrest at worst as we know
from Greece's experience," said SMBC Nikko's Noji.
Greece acknowledged on Monday it was having trouble
persuading foreign lenders to accept a plan to save nearly 12
billion euros over two years, essential to unlocking aid
payments the country needs to avoid bankruptcy..
Still, the euro is supported by expectations that the U.S.
Federal Reserve may start another series of quantitative easing,
most likely in the form of buying of government and other debt,
after its policy meeting ending on Thursday.
In a Reuters poll taken after Friday's payrolls report,
economists saw a 60 percent chance of the Fed embarking on QE3
this week compared with 45 percent in a late August poll.
As a result, the dollar stood near a four-month low against
a basket of currencies, with the dollar index at 80.357,
near Friday's low of 80.151.
Against the yen, the dollar traded at 78.20 yen, near
five-week low of 78.02 yen hit on Friday.