The euro ran into profit-taking on Wednesday after the Greek government won a vote of confidence as expected, but further losses may be limited as the market's focus turns to the Federal Reserve and its comments on the slowing US economy. The Greek government now faces a more arduous task of passing an austerity plan in order to secure a new bailout from the European Union and IMF.
The euro briefly pushed up to around $1.4435 on news of the vote win, but later retreated and last stood at $1.4381, down 0.2 percent from late US trading on Tuesday. At one point, the euro dipped to an intraday low around $1.4345 after hitting stop-loss offers, but its drop stalled right near support at the bottom of the cloud on the daily Ichimoku chart, a technical analysis tool popular among traders.
The euro will be beholden to headline risks in the near-term, said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong. The fact that Greek's parliament passed the confidence vote bodes well for the passage of the government's austerity plan and related legislation and for Greece receiving needed aid, said Rob Ryan, FX strategist at BNP Paribas in Singapore.
"If you're a member of parliament today and you vote for the vote of confidence in the government, it's very difficult to justify turning around and voting against the most significant piece of legislation that everybody knows is on the cards," Ryan said.
One-month risk reversals were trading around 2.5 percent in favour of euro puts, down from a peak of roughly around 2.7 percent hit this week, which was the highest since the eurozone's debt problems reached a crisis point in May-June 2010.
The dollar index, which tracks the greenback's performance against a basket of major currencies, stood at 74.702, well off last week's peak of 76.015. Against the yen, the dollar edged up 0.1 percent to 80.26, still well within the prevailing 79.50-81.50 range.
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