RTRS:FOREX-Euro bounces but vulnerable to Greek events
* Greece uncertainty threatens euro zone debt deal
* Euro support seen at $1.3565 for now
* 1-month implied vols on eur/dlr hit 1-month high
* Fed in focus, G20 meeting also eyed
By Anirban Nag
LONDON, Nov 2 (Reuters) - The euro edged up on Wednesday, rebounding from a three-week low against the dollar as investors took a breather from a deep sell-off, although it was vulnerable to the downside on jitters over Greece's referendum and weak data.
The euro was up 0.7 percent at $1.3787 , pulling away from the three-week low of $1.3608 struck on Tuesday but well below a seven-week peak of $1.4248 set last Thursday. Traders cite offers into the $1.3800 level with stops lurking just above that.
Investors are waiting for the final manufacturing PMI data from Germany, France, Italy with the numbers likely to back views that the euro zone is tipping towards a recession and which are likely to compound the euro's woes.
"After yesterday's sell-off, some bounce was expected but we think there are a lot of hurdles for the euro to clear and given the risk events, we do not see it rallying much," said Adam Myers, senior currency strategist at Credit Agricole.
"The Greek referendum has triggered a wave of risk aversion and flows in to the dollar."
The euro had dropped to the day's low of $1.3637 after Greek Prime Minister George Papandreou said he would push ahead with a referendum on an EU bailout deal, defying demands from lawmakers of his own party that he quit for jeopardising Greek membership of the euro.
The focus is now on the government's confidence vote on Friday. If Papandreou loses the vote, a new general election will be called and most likely there will be no referendum. But this is likely to spark renewed uncertainty and increase the chances of a disorderly default by Greece and risk of contagion.
Papandreou will also face the leaders of France and Germany, who summoned him for crisis talks in Cannes, before a G20 summit of major world economies.
The options market also indicated a fair amount of pessimism about the euro, with volatility hitting a one-month high on Wednesday, suggesting investors see more need to hedge against any negative events that may come out of Europe.
Implied volatility on one-month euro/dollar options, a gauge of expectations regarding a currency's price action, jumped to 16.35 percent from two-month lows of 12.75 percent marked last week.
FED UP NEXT
Some players speculated that the euro might win some respite in the short term as market attention turns to the outcome of a meeting of the Federal Reserve's policy-setting FOMC ending on Wednesday, which may prepare markets for further policy easing.
But most analysts were sceptical that the Fed could turn the tide on the euro, thinking risk sentiment will sour further and both the dollar and the yen will come out the biggest beneficiaries of the safe-haven inflows.
"While that may prevent a sharp fall in the euro or a sharp fall in risk appetite ahead of the FOMC, the risk is still more to the downside for those currencies. It'll be very hard for the market to want to buy the euro given the intense uncertainty around Greece," said Greg Gibbs, a strategist at RBS in Sydney.
The Fed will release its post-meeting statement at 1630 GMT, and Chairman Ben Bernanke will hold a media briefing at 1815 GMT.
The dollar lost 0.3 percent to 78.08 yen . Japan sold a record of nearly $100 billion worth of yen on Monday, driving the greenback from a record low of around 75.31 yen to a high of 79.55 yen.