Euro crawls up in Asia

The euro crawled up from eight-month lows on Tuesday as a report that Europe is considering beefing up its bailout fund prompted short-covering, and it could extend its rebound in the very near term given traders' overwhelmingly short positions in the currency.
The euro traded at $1.3543, flat from late US levels but holding above an eight-month low of $1.3360 hit on Monday. Oscillators such as the relative strength index show the currency is near oversold territory. Elliott wave analysis also suggested that the euro could be completing a five-wave decline from $1.4545 on August 29 with the drop to Monday's low, opening way for a corrective rebound.
Resistance looms at $1.3580, a 38.2 percent retracement of its September 15-26 decline, but a break of that level is likely to trigger some stop-loss buying and could see a rally to $1.3648 and $1.3716, 50 percent and 61.8 percent retracements of the same decline. The euro stood at 103.38 yen, having bounced from a fresh decade low of 101.90 yen hit on Monday, weathering some month-end selling from Japanese exporters.
The euro could be hurt by growing expectations of a rate cut by the ECB as some ECB officials said on Monday that cuts could not be ruled out, lifting European shares. "Rate cuts will be negative for the euro in terms of yield attraction. If a rate cut helps to shrink credit spreads, that could be considered as a positive for the euro but I think over time it will have an adverse effect," said Koji Fukaya, chief strategist at Credit Suisse in Tokyo.
Risk currencies also rebounded a tad after a wild selloff in the past two week, with the Aussie bouncing back to $0.9880, from a 10-month low of $0.9622. Most Asian currencies stabilised, with the Korean won trading at 1,171.3 won per US dollar, off a one-year low around 1,196.0.
The dollar index edged down 0.4 percent to 77.86, after hitting an eight-month peak of 78.863. The dollar remained stuck against the yen at 76.36, though traders reported growing talk Japan could intervene this week ahead of the end of their financial half-year. The yen has gained nearly 6 percent so far this year.