ET:Euro bouyed by hopes for Greece debt deal; yen slips
The euro hit a fresh two-month high versus the dollar on Wednesday, supported by hopes that Greece may soon agree to austerity steps needed to secure a second bailout and avoid a disorderly default.
The single currency also hit a seven-week peak against the yen, its rise gaining steam due to stop-loss buying.
The yen retreated broadly on the crosses, with traders saying the technical outlook for cross/yen pairs had improved after their recent breach of some technical resistance levels.
The euro surged 0.5 percent against the yen to 102.30 yen . It rose as high as 102.44 yen at one point on trading platform EBS, the euro's highest level versus the Japanese currency in about seven weeks.
The single currency rose 0.2 percent versus the dollar to $1.3281, having touched a two-month high of $1.3288 at one point.
While there are suggestions Greece is close to an agreement, Athens politicians have yet to agree to painful austerity measures to receive a second bailout package. They have delayed, once more, the deal deadline to Wednesday.
Even if an agreement is reached, the euro may have limited scope to rally, said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong.
"Potentially we may even have a buy-on-rumour, sell-on-fact type of outcome," Kotecha said.
"The eEuro has already strengthened fairly sharply on expectations of some sort of a deal and I think once it does happen we may see a little bit more upside at most," he added.
The next level of resistance for the euro is found at the 100-day moving average of around $1.3334, ahead of $1.3436, the 50 percent retracement of the decline from the late-October high of $1.4248 to the mid-January low of $1.2624.
A trader for a major Japanese bank in Singapore said the euro could see more short-covering if Greece agrees to a deal.
"The sense I get is that some short-term players have been putting on short euro positions," the trader said, adding that there was talk of stop-loss euro bids at levels above $1.3300.
Given such market positioning and because many players still have bearish views on the euro, the possibility of further position unwinding lifting the single currency to around $1.3500 or $1.3550 could not be ruled out, he added.
