* USD/JPY dips on month-end exporter selling
* Euro rises on hopes of a Greek debt breakthrough
* Aussie, NZD near 3-month peaks, await US GDP data
By Anirban Nag
LONDON, Jan 27 The yen was on track to
post its biggest daily gain in a month against the dollar on
Friday, recouping most losses made earlier this week as hedge
funds bought the currency, while the euro edged up on hopes of a
breakthrough in Greek debt talks.
Athens is locked in talks with its private creditors to
restructure its debt and needs a deal quickly to avert an unruly
default when a major bond redemption comes due in March. The
European Union's top economic official Olli Rehn said a deal was
likely at the weekend, giving a leg up to the euro.
Greece's creditors are demanding the European Central Bank
contribute to a deal to put the country's finances back on
track. Despite the euro's bounce, most investors are cautious
about adding euros to their portfolios in a big way on worries
Portugal may follow Greece and seek another bailout.
Yields on Portuguese government bonds set fresh euro-era
highs on Friday, extending their recent rise.
That kept the euro off five-week lows struck against the
dollar on Thursday. It was last trading 0.3 percent higher on
the day at $1.3135, having tripped stops above $1.3120.
On the downside, traders cited bids at $1.3070 and $1.3050.
"Investors seem to have grown used to Greek debt swap talks
dragging on," said Ankita Dudani, G10 currency strategist at
RBS. "What the real risk for the euro is contagion from a
disorderly Greek default and whether Portugal needs another
The euro underperformed against the yen, with the common
currency down 0.3 percent at 101.15 yen as the
Japanese currency recovered broadly from lows struck this week.
The dollar fell to 76.895 yen on EBS and came close
to support at a trendline off its Oct. 31 low at 76.70 yen.
Traders said Japanese corporates sold the dollar which had been
drifting lower after hitting a two-month high this week.
This prompted hedge funds to follow suit, pushing the
greenback through support at its 100-day moving average of 77.20
yen. The dollar was last trading at 77.05 yen, down 0.5
percent on the day.
The dollar hit a two-month high of 78.29 yen on Wednesday
after Japan reported its first annual trade deficit since 1980,
but the rally stalled right below resistance at its 200-day
Dudani of RBS said with interest rate differentials moving
in favour of the yen after the Federal Reserve's pledge to keep
rates low for longer than previously suggested, the dollar was
likely to stay subdued against the Japanese currency.
Deutsche Bank strategists said they did not see the recent
losses in the yen as a trend reversal and expected dollar/yen
and euro/yen to reach news lows during the course of the year.
However, analysts said the dollar was unlikely to stay under
pressure against the euro after some of the extreme bearish
positions against the common currency had been pared.
Chris Turner, chief FX strategist at ING, said investors
were underestimating the risks of a domino effect from Greece.
"Portugal could be a catalyst for a weaker euro in
February," he said. "The troika will be reviewing Portugal's
adherence to its bailout package, while bond investors are
already pricing a restructuring of Portuguese debt."
He added the euro looks a sell at $1.3130/50 levels for a
break of channel support at $1.3020.
Still, the Fed's decision encouraged the use of the dollar
in carry trades and sparked big gains for commodities like gold
The greenback has been on the back foot since the U.S. Fed
pledged on Wednesday to keep rates near zero for the next three
years. The dollar index was down 0.23 percent at 79.16,
not far from a six-week low of 79.067.
That pledge to keep rates ultra low and expectations that
the European Central Bank will inject large amounts of funds
next month also supported commodity currencies, with the
Australian and New Zealand dollars hovering near three-month
The kiwi has been a clear outperformer this month
with a gain of 5.8 percent, while the Aussie has added
more than 4 percent.
Growth-linked currencies could get a boost from U.S. GDP
numbers for the fourth quarter. Forecasts are for an expansion
of 3 percent from a year earlier which would be a sharp
acceleration from 1.8 percent growth in the prior three months
and the quickest pace since the second quarter of 2010.