WSJ:WORLD FOREX:Euro Holds Onto Gains Vs Dollar, Yen; Merkel To Meet Lagarde
-- Euro holds onto gains vs dollar, yen as players continue covering positions betting on further decline in euro
-- Market focus on German chancellor's meeting with IMF president later in day
-- Euro declines to new low vs Australian dollar
By Kosaku Narioka
Of DOW JONES NEWSWIRES
TOKYO -(Dow Jones)- The euro held onto gains versus the dollar and the yen Tuesday in Asia as market participants continued covering their positions betting on a further decline in the common currency amid a relative lack of headlines on the European sovereign debt crisis.
Still, upcoming events could pose further downside risks to the single currency as the euro zone's debt woes remain dire.
German Chancellor Angela Merkel will meet International Monetary Fund President Christine Lagarde later in the day to discuss the Greek bailout plan. On Thursday, the European Central Bank will meet. Spanish bond and Italian bill auctions are also scheduled the same day.
Germany and France on Monday pressed Athens and its bondholders to agree on a reduction of Greece's debt burden, warning that bailout loans from the euro zone and the International Monetary Fund will remain on hold until a deal is reached with private investors.
"After Merkel-Sarkozy, the focus will be on how markets respond to the bond auctions, how equity markets fare and whether a shockwave seen in the case of Hungary will occur again," said Atsushi Hirano, head of FX sales in Japan at the Royal Bank of Scotland.
The Hungarian forint has tumbled recently after talks between the International Monetary Fund and Hungary broke down.
Private investors holding Greek debt could be asked to accept a revised haircut of around 60% because a previously agreed 50% write-down is no longer seen as sufficient because of the deteriorating Greek economy, people with direct knowledge of the matter told Dow Jones Newswires.
For currency trading, however, many market participants are becoming reluctant about piling up additional positions betting on a further decline in the common currency.
A source of concern, said HSBC New Zealand Chief Manager Daniel Brdanovic, is that "everyone in the market is short euro and that means there is potential for it to correct quite sharply."
"Trading will likely center around euro crosses," Hirano from RBS said.
The Australian dollar rose to a fresh record high at EUR0.8012 in Asia following improving trade data from China and strong building approvals figures from Australia.
Meanwhile, the dollar may fall versus the yen to a low range above Y76.00 if U.S. Treasury Secretary Timothy Geithner, who will be in Tokyo later this week, expresses concerns regarding Japan's currency interventions, said Masafumi Yamamoto, Barclays Bank's chief FX strategist in Tokyo.
The euro was at $1.2777 as of 0450 GMT from $1.2765 late Monday in New York and was at Y98.12 from Y97.85, according to EBS.
The dollar was at Y76.79 from Y76.84. The dollar was at CHF0.9481 from CHF0.9492.
The U.K. pound was at $1.5475 from $1.5458.
The ICE Dollar Index, which tracks the dollar against a basket of currencies, was at 80.888 from 80.986.
Interbank Foreign Exchange Rates At 2350 EST / 0450 GMT
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