Euro rises in London

The euro inched up from a three-week low against the dollar on Wednesday but was vulnerable to further losses on uncertainty about whether Greece would win sufficient support for a debt restructuring. A clutch of Greek pension funds and some foreign investors are holding back on a bond swap deal which would enable Greece to meet a debt repayment on March 20, sparking concerns about a messy default if participation is low.
Given the risk that the deal could still be scuppered, gains in the single currency are expected to be limited with a drop to Wednesday's three-week low of $1.3103 very much a possibility. Analysts and traders said investors were gearing up for the debt swap deal to be agreed, leaving some room for disappointment. Greek private creditors have until late Thursday to say whether they will take part. Until then, most currency investors are unwilling to initiate fresh positions and if at all, were more likely to sell the euro on any bounce.
"There's a negative skew for the euro because most of the good news is priced in terms of getting an agreement on private sector involvement," said Carl Hammer, chief currency strategist at SEB in Stockholm. The euro was up 0.2 percent at $1.3130, with traders citing Middle East and corporate buying as well as talk of reported Asian sovereign bids around $1.3100. Reported offers below $1.3175 may cap its rise, traders said.
"The Greek PSI (bond swap) deal might well go through ... But beyond that the outlook for the euro is still weak," said Melinda Burgess, currency strategist at RBS. The US dollar was down 0.1 percent at 80.75 yen as investors unwound recent bearish positions placed on the Japanese currency. It held above support at 80.50 yen, the 23.6 percent retracement of its February rally to a high of 81.873 yen. The euro pulled further away from a recent high of 109.95 yen to trade flat at 105.95 yen.
The higher-yielding and growth-linked Australian dollar was marginally higher at $1.0555, having earlier hit a six-week low of $1.0508 after disappointing Australian economic growth data. It was also vulnerable as Greece concerns prompted investors to cut exposure to risky assets. The Aussie has shed some 3 US cents since hitting a seven-month high of $1.0857 last week. More losses could see it fall towards $1.0350, analysts said.