Euro off lows as Greek debt deal, ECB loom

SYDNEY: The dollar was on the defensive in Asia on Thursday, while the euro and commodity currencies saw some reprieve from this week's battering as Greece's debt restructuring efforts looked to have made some progress.

A Wall Street Journal report suggesting a different approach to bond buying by the Federal Reserve and upbeat US private-sector jobs data further lifted risk sentiment.

This saw the euro bounce off a trough of $1.3095 to $1.3149. Support for the single currency is seen around $1.3075, the 55-day moving average.

Still, the overnight moves were relatively mild with many players holding back for the outcome of Greece's bond swap offer to private creditors and the European Central Bank policy meeting later on Thursday.

Prospects for a successful Greek deal rose after a group of major banks and funds said they would take part in the swap. A positive outcome should clear the way for a bailout package and help Greece avert a messy debt default.

But "any suggestion the deadline might be extended would probably send shivers down the spine of any 'risk-on' traders and EUR would like suffer badly," BNP Paribas analysts warned.

With the euro on the front foot, the dollar index dipped back below 79.700. Its retreat from a three-week peak came as the Wall Street Journal reported Fed officials were considering buying longer-dated bonds and sterilizing the money flow by draining funds in the banking system.

Against the yen, the dollar drifted off Wednesday's low of 80.56 to 81.11, but held well within its current 80.50-81.90 trading band.

Commodity currencies recovered from this week's lows, with the Australian dollar back near $1.0600, up from a six-week trough of $1.0508.

The New Zealand dollar, however, suffered a slight setback after the country's central bank said the currency's strength could lessen the need for higher interest rates.

"The tone of today's Monetary Policy Statement was more dovish than we expected and we now forecast interest rates to remain on hold until Q4 2012," Barclays Capital analysts wrote in a note.

The kiwi was at $0.8158, down from an early high around $0.8200. Still, it remained clear of a six-week trough of $0.8101 set earlier in the week.