Euro softer on Greece; Aussie jumps on RBA surprise - Reuters

By Antoni Slodkowski

TOKYO | Tue Feb 7, 2012 1:40am EST

TOKYO (Reuters) - The euro nudged lower on Tuesday in Asia, though most traders clung to hopes Greece would finally clinch a rescue package despite its politicians postponing a decision to accept painful terms by yet another day.

The Australian dollar jumped a full cent to a six-month peak at $1.0812 and reached a record high on the euro after the Reserve Bank of Australia in a surprise move kept interest rates steady at 4.25 percent.

Failure to secure the 130 billion euro ($170 billion) rescue for Greece would risk a messy debt default and destabilize the entire euro zone, an outcome deemed too extreme to contemplate by many experts.

These hopes have kept euro bears in check for now, resulting in a volatile but resilient single currency. The euro stood at $1.3108, a tad below late New York levels. A recovery from $1.3027 hit overnight kept it not far from a six-week high around $1.3233 set last week.

"The $1.3230 area has proved strong resistance on a number of occasions, so once the Greek deal is reached the euro will most likely test it again," said Teppei Ino, currency analyst at Bank of Tokyo-Mitsubishi UFJ.

Analysts at Nomura Securities also said they would not be surprised to see a squeeze higher in the euro in the very short term on the back of the extremely elevated speculative short positions.

European Union officials say the full package must be agreed with Greece and approved by the euro zone, European Central Bank and International Monetary Fund before February 15 to allow for complex legal procedures involved in the bond swap to be completed by a March 20 bond redemption.

"But my sense is that the 1.3230 barrier will hold anyway. Once we get there people are going to think beyond the agreement and re-focus on the still bleak outlook for the euro zone," Ino continued.

Chartists said that possible renewed weakness in the euro may push it through support at $1.3020 which could see it drop to the January 25 low of $1.2931 and then to $1.2857 -- a 61.8 percent retracement of its January rise.

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THE CUT THAT NEVER WAS

The Aussie dollar gained broadly as much of the market had been wagering on a rate cut. In a brief statement after its monthly policy meeting, however, the RBA did leave the door open to an easing if domestic demand weakened further.

A jump in the Aussie saw the euro fall to a record low at

A$1.2124.

"As the dollar and euro don't have interest rates, there are not many things to buy for investors and the Aussie remains the currency of choice," says a trader at a Japanese brokerage.

The euro could fall to around A$1.20 while the Aussie is likely to retest a high of $1.10 touched last July, the trader said.

Against the yen, the dollar gained 0.2 percent to 76.71 yen, up from 76.14 hit after upbeat U.S. jobs data last Friday.

It was well bid after Japan Finance Minister Jun Azumi said the country followed up its record yen-selling intervention last year with covert operations and that it is ready to step in again to counter speculative moves.

Tokyo spent roughly 1 trillion yen ($13 billion) in early November on undeclared forays into the currency market.

Spreads on dollar/yen risk reversal are rising in favor of dollar calls, with some players buying dollar calls as they bet on intervention by Japan. One-month dollar/yen risk reversal spreads are bid at 0.02, compared to 0.3 in favor of dollar puts a week ago.

(Additional reporting by Hideyuki Sano in Tokyo, Ian Chua and Reuters FX analyst Krishna Kumar in Sydney; Editing by Joseph Radford)