Euro trims gain in London

The euro hit a two-month high against the yen on Tuesday on relief that Greece was able to raise funds from the market, though gains were quickly trimmed as wider eurozone fiscal concerns weighed on sentiment. Extending its rally from last week, the euro hit its strongest versus the yen in nearly two months, while edging up to a one-week high against the dollar as traders locked in profits on short euro positions, which peaked last week.
But analysts saw limited upside potential given that the euro zone's debt problems and weak growth mean the European Central Bank is in no rush to hike interest rates. "The uncertainties surrounding Greece and wider fiscal issue are still a problem," said Daragh Maher, senior currency strategist at Credit Agricole CIB in London.
The euro was supported by position squaring, while Greece's sale of 5 billion euros of seven-year debt on Monday eased some risk aversion over its massive debts. "The fact that Greece has come to market encouraged some people to square up their euro shorts which were at extreme levels," said RBS currency strategist Paul Robson.
By 1215 GMT, the euro was back to flat on the day versus the dollar after hitting $1.3539 in early European trade according to Reuters data, its strongest since March 23. The euro has gained roughly 1.5 percent versus the dollar since Friday, when eurozone leaders announced plans for a safety net for Greece, which would include the International Monetary Fund, should Athens need help in servicing its debts.
Market participants said the euro's upside was capped around $1.3500, where as much as 1 billion euros' worth of options were reportedly set to expire at 1400GMT. The euro climbed half a percent on the day to 125.44 yen according to Reuters data, its strongest since early February, before pulling back to 124.75 yen.
Technical analysts said a daily close above the 125.25 level would complete a head-and-shoulders reversal pattern, paving the way for fresh upside potential. The dollar fell around 0.2 percent against a currency basket to 81.155, its lowest in nearly a week, as European shares rose 0.3 percent and oil prices were supported around $82/barrel.
The US currency edged up against the yen to 92.52 yen. Traders reported strong UK clearer selling capping the pair. The Australian dollar rose to its strongest in more than a week at $0.9215, after an Australian central bank watcher argued the Reserve Bank of Australia (RBA) was likely to lift interest rates next week to 4.25 percent.