Euro holds sharp gains

The euro steadied on Wednesday to hold sharp gains made the previous day against the dollar, as investors cut short positions on views that its fall over Greece's debt problems had run its course. The euro at one point had shed as much as 10 percent since its 2009 high in November as worries over whether Greece could service its debt mounted. But currency speculators later reversed record short euro positions they had built into last week.
It is still down about 9 percent since that high. But the small rebound has come in tandem with a sharp pullback in the dollar's upward momentum versus other major currencies, including the Australian dollar, with charts suggesting more room for the greenback to slip, market players said.
Investors sold the Aussie to take profits from the currency's climb the day before. But a rise in Hong Kong shares, on their first trading day since China raised bank reserve requirements last week, fed a return of risk appetite among investors and supported the Aussie. The low-yielding yen, which also retreated on Tuesday, was soft against the likes of the Australian dollar and the euro.
"I see this euro rebound as a temporary break from its longer-term downward trend. But its corrective move up could continue until early next week when Chinese markets resume full-fledged activity," said Hideki Amikura, deputy general manager of the forex section at Nomura Trust bank.
The euro was steady at $1.3776 after rising as far as $1.3782 on trading platform EBS, its highest in a week. Traders saw resistance for the euro around $1.3850, a tad above last week's high at $1.3840. But if it could get through that level, its rebound could accelerate, traders said.
The dollar index, a gauge of the greenback's performance against another six major currencies, was little changed at 79.660, a touch above Tuesday's one-week low of 79.593. The Australian dollar slipped 0.1 percent to $0.9012 with investors booking profits from its climb as far as $0.9028 the previous day, its highest since late January.
The Aussie remained supported by comments by the Reserve Bank of Australia on Tuesday that more rises in interest rates in Australia were likely this year as well as gains in commodities. The euro was up 0.2 percent against the yen at 124.39 yen after climbing as high as 124.50 yen on EBS, its highest in about two weeks.
The dollar rose to 90.36 yen, up 0.2 percent from late US trade on Tuesday when it climbed as far as 90.52 on EBS, its highest since February 4. The US Federal Reserve will release the minutes from its meeting of January 26-27 later on Wednesday and investors were looking for hints of an exit strategy from loose monetary policy.