FOREX-Euro near 2-mth highs after Greece; outlook uncertain
10/02/2012 at 04:28
* Euro reaction to Greek deal muted, correction eyed
* Yen near 2-wk low on dlr, near 2-mth low on euro
* Aussie slips, RBA repeats scope to ease
By Antoni Slodkowski
TOKYO, Feb 10 Reuters - The euro clung to recent gains on Friday, trading near two-month highs against the dollar and the yen after Greece agreed to a deal on reforms needed to avoid a chaotic default and destabilisation of the euro zone.
But investors wondered whether the Greeks will actually meet the harsh demands of the package and if the single currency's recent strength could prove fleeting, particularly after it stalled at an important chart resistance level on Thursday.
The euro was last at $1.3275
"The reaction to the deal, both for the euro and equities, was muted suggesting it has been largely priced in by the market," said Teppei Ino, currency analyst at Bank of Tokyo-Mitsubishi UFJ.
The single currency has gained more than 5 percent from a 17-month low of $1.2624 hit in January as the market has bet Greece will hammer out its second bailout deal with international lenders.
"We may see a short period of consolidation around the current levels, but problems in the euro zone are not limited to Greece. My sense is that sooner or later the euro will be hurt by them and will resume its decline," he said.
Adding to the uncertainty, euro zone finance ministers arriving for bailout talks in Brussels warned there would be no immediate green light for the rescue package. First, Greece will have to prove itself by making good on past promises that have never been implemented, they said.
Lending some support to the euro were remarks by European Central Bank chief Mario Draghi who flagged tentative economic improvement in the euro area, lessening expectations of more rate cuts. .
The ECB kept interest rates at a record low 1.0 percent on Thursday as widely expected. Draghi was non-committal on whether the bank would participate in Greece's debt restructuring, although he indicated that the bank could pass profits from its Greek bond holdings to euro zone countries.
The euro stayed firm against the yen, which has softened on the back of offshore hedge fund selling prompted by Japan's shrinking current account surplus. Tokyo importers as well as model funds have also been spotted selling the yen.
The single currency fetched 103.13 yen
A Tokyo-based European bank trader also said some yen long holders appear to have given up hopes of hitting 75 yen after data confirmed that Japan conducted stealth intervention following its massive yen-selling intervention on Oct. 31.
The Australian dollar slipped 0.3 percent to $1.0748
Aussie has support from daily Ichimoku charts' tenkan line at $1.0707.
Additional reporting by Hideyuki Sano in Tokyo and Masayuki Kitano in Singapore; Editing by Edwina Gibbs
antoni.slodkowski@thomsonreuters.com+81 3 6441 1130 Reuters Messaging: antoni.slodkowski.thomsonreuters.com@reuters.net
Keywords: MARKETS FOREX