RTRS: Euro gains vs U.S. dollar, but weak bias remains
* Real money and leveraged accounts seen buying euros
* EU's Barroso comments on euro bonds help euro off lows
* Markets look to France, Germany, Greece conference call (Updates prices, adds comment, U.S. data, changes byline, dateline; LONDON)
By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 14 (Reuters) - The euro climbed against the dollar on Wednesday, bolstered by comments from the European Commission suggesting the possibility of joint euro area bonds that could help ease the region's debt crisis.
The single euro zone currency remained vulnerable though to a drop towards recent lows and some analysts reckoned it would be a struggle to get back above $1.3850.
"For now, I think the trade lower in the euro has lost momentum, with the news on the euro zone kind of stabilizing," said Tom Fitzpatrick, chief technical strategist at CitiFX in New York.
"Overall we haven't had incremental bad news and that helps, even though the short-term bias is still to sell the euro."
The euro climbed after European Commission President Jose Manuel Barroso pledged the Commission would soon publish a long-promised study on introducing euro area bonds, viewed by some as a potential solution to sovereign debt concerns.
Although the comments boosted riskier assets including stocks, market players remained wary after Barroso warned the move would not put an end to the crisis, while Germany also remains firmly opposed to any such move. [ID:nB5E7K601K]
In early New York trading, the euro was up 0.3 percent at $1.37260 EUR=EBS. Demand from leveraged investors and some Eastern European names pushed the single currency to a session high of $1.37480, market players said. Traders also cited demand for euros at the 1100 GMT London fix.
Gains, however, were capped by offers above $1.3730-50, and the euro was seen vulnerable to a test of Monday's seven-month trough at $1.34949.
Moody's downgrade of Societe Generale (SOGN.PA) and Credit Agricole (CAGR.PA) had a limited impact on the euro as the move had been widely anticipated. [ID:nL3E7KE09F].
Fitch, meanwhile, downgraded five Spanish regional banks, highlighting concerns about the fragility of the euro zone's banking system. [ID:nWLA5104] This news pushed the euro below $1.37.
Focus now turns to a conference call due later on Wednesday between Greek Prime Minister George Papandreou, French President Nicolas Sarkozy and German Chancellor Angela Merkel. [ID:nL5E7KD29C]
Markets will be looking for strong reassurances that Greece won't default on its debt. They're also hopeful that the call may result in fresh financial support for Greece, but they were not confident any agreement would be enough to stem contagion to larger euro zone countries such as Italy and Spain.
"If pressure continues on bigger countries like Spain and Italy and if there is no help from the Federal Reserve in the form of more quantitative easing there is a risk of euro/dollar settling into a $1.35-$1.30 range," said Roberto Mialich, currency strategist at Unicredit in Milan.
U.S. Treasury Secretary Timothy Geithner, who will attend a meeting of EU finance ministers in Poland on Friday, expressed confidence in the ability of euro zone leaders to resolve its debt crisis. [ID:nS1E78D0FH]
Focus will switch back to the U.S. dollar next week when the U.S. central bank's Federal Open Market Committee meets, with any hints policymakers are considering another round of quantitative easing likely to weigh on the dollar.
U.S. economic data on Wednesday did little to suggest that the Fed is veering away from further monetary easing as retail sales and producer prices showed zero growth in August. For a wrapup of U.S. economic data, click on [ID:nS1E78D0B7].
The dollar index .DXY was flat at 76.898, and the cautious rise in investor appetite to take on risk helped the Australian dollar pare some losses to last trade down 0.6 percent at US$1.0259 AUD=D4.
The dollar edged lower versus the yen to 76.680 JPY=EBS, within the 76.40/77.85 range of the last three weeks. Investors remained wary of possible intervention by Japan to weaken the yen, after the Swiss National Bank set a minimum target exchange rate in the euro versus the franc last week. (Additional reporting by Nia Williams in London; Editing by Chizu Nomiyama)
