Euro recovers in London

The euro erased early losses against the dollar on Tuesday as Asian accounts bought on dips and caught speculative players by surprise, but the shared currency was weighed by peripheral eurozone debt concerns. The euro initially fell to its lowest in more than a week against the dollar, to $1.3823 on trading platform EBS.
Dollar back below 81.00 yen But buying by Asian sovereign accounts, particularly from the Middle East, stemmed losses and sent short-term traders scurrying to cover positions, sending the euro back around a full cent from lows. Stop-loss orders around $1.3950/60 also helped push it up further to the day's high of $1.3973, up around 0.3 percent on the day. More stop-loss orders were seen above $1.40, traders said. Traders also mentioned buying interest around $1.3850 to protect option barriers at $1.3800, and talk of a double no-touch option at $1.38/$1.48.
"We saw a sharp turnaround in the market, wrong-footing some players, but the fundamental view regarding the euro and sovereign risks hasn't changed," one London-based trader said. Analysts said there was still potential for a slide to more important support at its October 20 low of $1.3697, having fallen below support at $1.3835, the 76.4 percent retracement of its move up from the October 20 low to $1.4283 on November 4.
"We are bearish on the euro with spreads widening and peripheral euro zone debt once again under pressure," said Hans-Guenter Redeker, chief forex strategist at BNP Paribas. The cost of protecting government debt against default in Ireland, Portugal and Spain has risen substantially in the past week, although credit default swap prices eased a bit on Tuesday ahead of a Portuguese bond auction the following day.
Greece successfully sold 390 million euros of six-month debt on Tuesday but had to pay 28 basis points more in yield compared with an October sale. The euro also shed losses against the yen, but was still down 0.4 percent at 112.50 yen after falling to a one-week low of 111.74 yen
Traders said some macro players and Commodity Trading Advisers, who are short-term players, were closing their long euro and short dollar forward and futures positions ahead of their book closing at the end of this month or next. However, the dollar fell 0.7 percent to 80.59 yen after earlier holding steady above 81.00, above its 1995 record low of 79.75 yen and capped at 82 yen, where offers from Japanese corporates were seen.
A pullback in risk-taking sentiment after China said it would strictly manage company short-term foreign debt quotas prompted yen gains, traders said. The market was also watching this week's meeting of Group of 20 leaders in South Korea, as they attempted to agree on ways to reduce imbalances to bolster a fragile global economic recovery. The New Zealand dollar was pressured on reports the United States had stopped importing kiwi-fruit vine on worries that an orchard could be infected with a virus.