LONDON: The euro edged higher against the dollar on Wednesday on signs Greece's bailout was progressing smoothly, although further gains were expected to be capped as a stronger dollar trend driven by higher US Treasury yields reasserted itself. The shared currency rose 0.3 per cent to an almost two-week high of $1.3283 after Greece's lawmakers approved the country's second bailout deal, as expected. Many analysts said the approval had been seen as a formality but signs the Greek bailout was on track, coupled with some short covering as investors who had bet against the euro squared those positions, boosted the single currency. "This was not a big step but has been perceived as positive by the market," said Lutz Karpowitz, currency analyst at Commerzbank. Technical analysts said the euro rally was likely to run out of steam around $1.33, just above the 61.8 per cent retracement of the late February to mid-March fall from $1.3485 to $1.30. "We would expect these levels not to break which would mean the euro/dollar uptrend comes to an end in the short-term. The broader trend is still a stronger dollar and on that point we see the economy picking up in the US," said Karpowitz. The dollar has climbed in recent weeks on fading expectations of further monetary easing by the US Federal Reserve after a modest brightening of its economic outlook. In contrast, investors remained nervous of another flare up in the euro zone debt crisis. Although Greece received its first batch of bailout payments this week, the Italian government looked set to clash with trade unions over reforms to employment law. "If US data remains solid US yields may continue to track higher, while Europe faces some risks to this euro strength from the Italian labour reform talks and continued poor economic news from Spain," said Christopher Gothard, head of FX for Brown Brothers Harriman in Hong Kong. Ten-year US Treasury yields were last trading around 2.37 per cent, within sight of a 4-1/2 month high of 2.399 per cent hit on Tuesday. US housing data, due later in the session, could help boost the dollar if it adds to expectations that growth in the world's largest economy is picking up. YEN DIPS BROADLY Rising US yields and monetary easing from the Bank of Japan last month have also boosted the dollar against the yen. The greenback rose 0.1 per cent to 83.77 yen, not far off an 11-month high of 84.187 yen hit last week. During the Asian session Japanese exporters were seen selling the dollar ahead of the end of their financial year on March 31, but market players said there was good demand to buy the greenback on dips. The euro touched a near five-month peak of 111.30 yen on trading platform EBS, nearing resistance around 111.57 yen, the peak hit on Oct. 31 when the Japanese authorities last intervened in the market. The yen also sagged against sterling, with the pound rising to a session peak of 133.37 yen, its highest level against the Japanese currency since June 2011. Meanwhile the Australian dollar rose 0.3 per cent to US$1.0506, recouping some losses after posting its biggest daily drop in three months on Tuesday. Morgan Stanley strategists recommended selling the growth-correlated Australian dollar on any rebounds to US$1.0530 given signs growth in China was slowing.

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