* Euro helped by hopes of Greek debt deal, PMI data
* Dollar hits 3-mth low vs yen, sparking intervention talk
* Greece, Portugal worries still seen weighing on euro
* Decent German, Portuguese bond sales; US data ahead
By Jessica Mortimer
LONDON, Feb 1 Encouraging manufacturing
data and hopes of a deal on Greek debt lifted the euro on
Wednesday and the yen hit a three-month high versus the dollar,
fuelling speculation Japan's authorities may intervene to curb
Greek Finance Minister Evangelos Venizelos said talks with
private creditors on a bond swap deal that is key to the country
avoiding an unruly default were "one formal step away".
The euro was also helped as a euro zone manufacturing
activity survey was revised up, with German factories posting
growth, and by decent demand at auctions of German and
The euro was up 0.4 percent at $1.3128, off an
earlier low of $1.3026 on EBS that took it close to
psychological support at $1.30. Traders said it extended gains
after pushing through stop loss orders at $1.3080 and $1.3125,
though offers around $1.3150 may limit its rise.
"We had the euro zone PMI just slightly better than expected
and the UK PMI also stronger than expected and there's probably
talk going around that a (debt swap) agreement is imminent out
of Greece," said Audrey Childe-Freeman, EMEA head of currency
strategy at JPMorgan Private Bank.
"All of those factors have revived the euro after the
disappointing performance yesterday but it's not an all-clear
yet," she said, adding a Greek debt deal would be needed for the
euro to push above $1.3250.
Athens must still convince international lenders it can push
through spending cuts and labour reform while concerns grow that
Portugal may follow in Greece's footsteps and be forced to
restructure its debt.
Analysts said the euro may be vulnerable to further falls
while it remains below technical resistance at $1.3244, the 38.2
percent retracement of its October-January decline.
YEN INTERVENTION ALERT
Traders were on alert for possible Japanese intervention to
stem the rise in the yen as the dollar fell to its lowest in
three months versus the Japanese currency, particularly as the
euro was also weak, staying below the key 100 yen level.
The dollar fell to 76.039 yen on the EBS trading
platform, its lowest since Oct. 31 when it hit a post-World War
Two record low of 75.311 yen and prompted massive yen-selling
intervention by Japanese authorities.
The euro was up 0.2 percent at 99.91 yen, having
earlier dropped to 99.25.
"We are approaching the lows seen before the last round of
intervention so obviously there's a lot of tension. It's a very
unpleasant situation for the Japanese authorities given that
euro/yen is below 100 yen," said Niels Christensen, currency
strategist at Nordea in Copenhagen.
The dollar looked poised to lose ground for a fifth straight
day against the yen, pressured by last week's pledge by the
Federal Reserve to keep interest rates near zero until late 2014
which pushed yields on U.S. Treasuries down sharply. This has
dented dollar/yen, which is particularly sensitive to changes in
U.S. borrowing costs.
Focus will now turn to U.S. ISM manufacturing data at 1500
GMT and key U.S. jobs data on Friday. If these come in on the
weak side this could increase the chances of more quantitative
easing and weigh further on the dollar, analysts said.
The dollar index was down 0.3 percent at 79.059,
while markets watched for any moves from the Swiss National Bank
as the euro traded near the floor it set at 1.20 Swiss francs.
The euro was at 1.2043 francs, just above 1.2025
hit on Tuesday, its lowest since the floor was set in September.
China's Purchasing Managers' Index earlier showed the
manufacturing sector expanded modestly, easing concerns about
the global economy and helping lift the Australian dollar
up 0.5 percent to $1.0664.