Euro rally on hold in Asia

A short-squeeze rally in the euro stalled in Asia on Wednesday ahead of debt auctions in Germany, with market players dubious about the eurozone's plans to fend off a sovereign debt crisis as some countries face huge debt refinancing needs. The euro is meeting resistance after posting its biggest one-day rally in nearly two months on Tuesday as investors heavily trimmed bearish positions in the common currency after upbeat data bolstered risk appetite.
"This seems like just a temporary risk-on trade, helped by easing in dollar funding pressure after the year-end, some good economic numbers and a lack of bad news out of Europe," said Minori Uchida, a senior analyst at Bank of Tokyo-Mitsubishi UFJ. Traders are also looking to the meeting of French President Nicolas Sarkozy and German Chancellor Angela Merkel on January 9 to see how much progress Europe can make on their pledge for tighter fiscal integration.
The euro stood at $1.3030 in late Asian trade, down 0.1 percent from late US levels. It gained as much as 0.9 percent on Tuesday to reach its highest in a week at $1.3077 in the wake of a better-than-expected US manufacturing report. Also aiding the euro, minutes from the US Federal Reserve's December meeting were construed by markets as dollar-negative.
The Fed said it would begin publishing forecasts on the path of interest rates later this month, a move that could suggest rates will be on hold for longer than previously expected. Against the yen, the single currency was at 99.84 yen, down 0.2 percent on the day but still up from a decade low of 98.71 hit in holiday-thinned trade on Monday.
The greenback lost ground slightly against the yen, falling to 76.67 yen, not far from a record low 75.311 marked late last year, in part due to easing of dollar funding pressure after the year-end period. Commodity currencies slipped as players took profits from the Aussie's latest climb to a record high against the euro. The euro edged up to A$1.2595 on Wednesday after falling to a record trough of A$1.2564 on Tuesday. That helped knock the Aussie to $1.0347 versus the greenback, off Tuesday's two-month high of $1.0387. The Aussie faces heavy resistance seen around $1.0400, including its 200-day moving average around $1.0416.