The euro edged higher on Tuesday but crowded bets on the currency could cause a near-term decline before it is able to take another shot at its November peak just above $1.4280. One gauge of market positioning shows that currency speculators have ramped up their long positions in the euro to a three-year high, suggesting the single currency may come under pressure if profit-taking sets in.
While investors have recently been more preoccupied with the prospect of an interest rate hike by the European Central Bank as early as next month, the debt crisis threatens to return to the fore. The euro rose 0.1 percent to $1.3981, having retreated from a four-month high around $1.4036 on Monday.
The euro could consolidate for some time below Monday's high before making another move higher. In the medium-term, the euro has support in the $1.3840 to $1.3860 area, where a few intraday highs hit in late February are clustered as well as the euro's early February peak of $1.3862. Unrest in the Middle East and higher oil prices also bear watching, said a trader for a major Japanese bank in Singapore.
The dollar index dipped 0.1 percent to 76.458, having gotten a bit of reprieve after hitting a four-month low of 76.124 on Monday. One factor that may support the dollar and weigh on the euro in the near-term is market positioning. The dollar edged up 0.1 percent against the yen to 82.28 yen , roughly in the middle of the prevailing range seen over the past week of roughly between 81.60 yen and 83.00 yen. The yen took in its stride news this week about cross-border corporate investment involving Japanese firms.
Western Digital Corp, the world's No 2 hard drive maker, has agreed to buy Hitachi Ltd's hard disk drive operations for about $4.3 billion in cash and stock. In the other direction, Terumo Corp has said it would buy US medical device company CaridianBCT from a Swedish firm for about $2.6 billion, marking the largest acquisition by a Japanese medical equipment maker.
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