FOREX-Euro resilient; Aussie eyes RBA rate decision
06/02/2012 at 23:55
* Markets appear optimistic that Greece will secure rescue deal
* Athens baulking at accepting painful terms for new package
* Aussie holds firm in face of possible rate cut by RBA
By Ian Chua
SYDNEY, Feb 7 Reuters - The euro held steady in Asia on Tuesday as markets remained sanguine that Greece will eventually clinch a rescue package, even as the country's political leaders delayed their decision to accept painful terms by yet another day.
Failure to secure the 130 billion euro $170 billion rescue would risk pushing Athens into a chaotic debt default and destabilise the entire euro zone, an outcome deemed too extreme to contemplate.
That was seen keeping euro bears restrained for now at least, resulting in a volatile but resilient single currency. It stood at $1.3122
Only a clear break of $1.3020 would see the euro move to $1.2930-50, the Jan 25 low and then to $1.2855-75 the 61.8 percent retracement of the $1.2624-1.3233 rally in January, traders said.
Still, without a clear outcome for Greece, the euro will remain choppy.
"The stalemate among the three political parties comes ahead of the April elections, implying that this in large part could be domestic politicking," analysts at BNP Paribas wrote in a note. "As these talks continue, the euro will likely remain vulnerable to any headline risk."
The euro's resilience saw the dollar index retreat to 79.076, from a session high of 79.516, still uncomfortably close to an 8-week trough of 78.623 plumbed on Feb 1.
Against the yen, the dollar was steady at 76.55
Among commodity currencies, the Australian dollar is the one to watch ahead of the Reserve Bank of Australia's RBA rate decision due at 0330 GMT. It stood at $1.0720
Interbank futures imply a 56 percent chance of a 25 basis point cut to the 4.25 percent cash rate, while many analysts polled by Reuters believe the RBA has room to cut given a benign inflation environment.
"The RBA may well take advantage of an overbought AUD/USD to squeeze it lower by proving more dovish than expected," said Sebastien Galy, strategist at Societe Generale.
"The washout should be an opportunity to sell the downside in AUD/USD as it is likely to remain very much bid as a high yielding currency in an environment of extremely low yields and this in spite of deteriorating fundamentals."
Should the RBA surprise by leaving rates unchanged, the Aussie could re-test Friday's peak and then target the 29-year high of $1.1081 set in July.
Additional reporting by Reuters FX analyst Krishna Kumar; Editing by Wayne Cole
ian.chua@thomsonreuters.com+61 2 9373 1871RM: ian.chua.thomsonreuters.com@reuters.net
Keywords: MARKETS FOREX