Euro hits 3-week low vs dlr on bailout delay worries - Reuters

Euro banknotes and a currency graph are placed on mirror and in this picture illustration taken in Zenica, January 22, 2011.

Credit: Reuters/Dado Ruvic

By Hideyuki Sano

TOKYO | Wed Feb 15, 2012 9:51pm EST

TOKYO (Reuters) - The euro slid to a three-week low versus the dollar on Thursday as officials in Europe considered delaying a bailout package for Greece even as the indebted country met demands set by international lenders.

Several EU sources said on Wednesday the euro zone is examining ways of holding back parts or even all of the bailout program until after elections expected in Greece in April while still ensuring it avoids a disorderly default.

"The euro is under pressure as the talk of delaying the bailout package is raising uncertainty. It's not clear whether Athens will be able to secure funds needed to redeem bonds on March 20," said Sumino Kamei, senior analyst at Bank of Tokyo-Mitsubishi UFJ.

Greece has 14.5 billion euros of debt repayments due that day -- a sum it cannot pay without the help of international lenders. Traders are unsure how policymakers would be able to hold back bailout funds beyond then without triggering a disorderly default.

That uncertainty prevented the euro benefiting from news that party leaders in Athens have met the final two demands set by the country's international lenders to seal the bailout.

The euro fell 0.4 percent to $1.3007, slipping below important support including a 38.2 percent retracement of its rally this year at $1.3056, and its 55-day moving average of $1.3052. A 50 percent retracement of the same rally at $1.2974 is seen as the next possible next target.

The euro fetched 102.03 yen, unable to clear important resistance including the 90-day average at 102.74 and Ichimoku cloud top at 102.79.

The greenback hovered below a 3- month high of 78.67 yen hit on Wednesday, stabilizing at 78.42 yen.

SHOT IN THE ARM

While a clear break above its 200-day moving average this week has given bulls a shot in the arm, some analysts cautioned that it was premature to say whether there would be further gains in the dollar.

"In the past few years, the dollar/yen has broken above the 200 day average many times but they have proved to be false signals (of a bull trend). So I don't attach importance to the fact that it crossed above the 200-day average," said Makoto Noji, senior strategist at SMBC Nikko Securities.

"The Fed's minutes also showed QE3 is possible so it's hard to just keep selling the yen, even though U.S. shares didn't react positively to the minutes," he added.

While the minutes of the Fed's January policy meeting contained few surprises, they did show a few officials believed that another round of bond buying by the central bank would be needed before long to support the U.S. economy.

Expectation that the Fed could soon start its third round of quantitative easing helped to keep U.S. short-term note yields low, with the two-year yield slipping on Wednesday from a seven-week high hit earlier in the week.

Dollar/yen has had a high correlation with yield gaps between Japan and the United States, with the two-year yield spread often moving in tandem with dollar/yen.

U.S. Congress leaders reached a deal to extend a payroll tax cut until the end of this year, but that is unlikely to give fresh impetus to the dollar as markets had expected that outcome, SMBC Nikko's Noji also said.

The Australian dollar jumped following data showing Australian employment climbed by 46,300 jobs in January, surging past expectations of a rise of 10,000.

But as doubts about the bailout package for Greece undermined risk assets, the currency slipped 0.2 percent to stand at $1.0680.

The New Zealand dollar dropped 0.8 percent to $0.8264.

(Reporting by Hideyuki Sano; Editing by Joseph Radford)

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