Euro clings near two-month high in Asia

The euro clung near a two-month high on Thursday after the Federal Reserve showed it was in no rush to scale back its easy policy, leaving the European Central Bank's stance looking comparatively hawkish. The contrast between the Fed's emphasis on efforts to cure high unemployment and the ECB's growing concern about inflation could keep the euro in an uptrend from a four-month low hit earlier in the month.
Still, the currency's two-week-long rally faces a growing risk of overstretching in the near term with resistance seen looming around $1.3740-3786, analysts said. The euro held flat at $1.3710 on Thursday, still within sight of a two-month high of $1.3723 marked on Wednesday and an option barrier said to be around $1.3725.
Its near-term resistance includes a 61.8 percent retracement of its two-month decline until early January, around $1.3740, as well as its November 22 high of $1.3786. The euro's rally even from a four-month low of $1.2860 set on January 10 has come without a major adjustment, it having risen in 12 of the last 13 sessions. On some crosses the euro is already starting to lose steam.
The euro slipped to around 1.2919 franc from a six-week high of 1.3068 hit on Friday and again on Monday. Against the yen, it has been blocked at resistance around 113 yen. The euro has been helped by signs of some stability in eurozone periphery countries' bond markets but many market players also say doubts remain on whether these nations can stand on their own feet.
The dollar changed hands at 82.20 yen, showing little sign of breaking out of its recent 82.00-83.50 yen range. Strong bids at and below 82 yen, including buying related to an options barrier at 82 yen, are keeping its decline in check, traders said. The dollar also failed to capitalise on a rise in US bond yields after the Fed. The correlation between US two-year yields and the dollar/yen rate has completely broken down since late last year. The dollar index against a basket of major currencies hovered at 77.739, just above a 10-week low of 77.689 hit on Wednesday.