* Euro little changed, commodity currencies still under pressure
* Markets cautious despite G8 pledge to combat market turmoil
By Ian Chua
SYDNEY, May 21 (Reuters) - The euro started the week on a subdued note and commodity currencies remained mired at multi-month lows as investors found little comfort in a pledge by world leaders to take all steps necessary to combat financial turmoil.
The single currency last stood at $1.2786, a touch firmer than its New York close on Friday as markets saw Saturday’s comments from a summit of the G8 leading industrialised nations as short on details and long on rhetoric.
At the meeting, world leaders also backed keeping Greece in the euro zone and revitalising a global economy increasingly threatened by Europe’s debt crisis.
“There’s a lot of talk and no substance. Until you get some certainty about Greece and the fear of contagion eases, the volatility is here to stay,” said Savanth Sebastian, an economist at CommSec.
“Keep in mind there’s no great news coming out of China as well. There’s a lot of talk about China slowing, so that’s further uncertainty.”
On Friday, the euro was swept up by a wave of short-covering that lifted it from a four-month trough of $1.2642. That low should provide initial support, ahead of the 2012 low at $1.2624. A break there would take the single currency back to depths not seen since August 2010.
Worries about a messy Greek exit from the euro zone and problems in Spain’s banking sector had seen investors dumping the euro in the past few weeks.
“A Greek exit would produce significant contagion to other peripheral countries, where both sovereigns and banks would come under pressure. Limiting the damage of contagion would depend crucially on the speed and magnitude of the policy response,” JPMorgan analysts wrote in a report.
Data from the Commodity Futures Trading Commission (CFTC) released on Friday showed bets against the euro had risen to a record high.
Not surprisingly, the safe-haven U.S. dollar and yen were among the best performers last week. The greenback on Friday hit a four-month high against a basket of major currencies. It was trading slightly off that peak on Monday.
It was underperforming the yen, however, and last stood at 79.15, not far off a three-month low around 79.00 set on Friday.
The CFTC data showed a lightening of bearish yen bets, although substantial short positions remained. This has left intact the risk of further downside for dollar/yen if such positions are forced to unwind, analysts said.
“We think that a move below 79.00 could trigger such a squeeze and cause an accelerated move toward 78, where a threat of intervention would likely provide the cross with support,” BNP Paribas analysts wrote in a note.
Against a jittery backdrop, commodity currencies such as the Australian dollar continued to struggle. The Aussie was last at $0.9835, still within striking distance of a near six-month trough of $0.9795 plumbed on Friday.
There is little in terms of market-moving data out of Asia on Monday, leaving the focus firmly on developments in Europe.