Euro sheds gains in London

The euro gave up gains on Friday, trading not far from an eight-month low against the dollar hit the previous day on fresh concerns about European banks' exposure to Greece as worries about a possible Greek default resurfaced. Markets were jittery as Greece denied reports that one option in the debt crisis would be an orderly default with a 50 percent haircut, while Deutsche Bank warned European banks' writedowns on Greek bonds could exceed 25 percent.
A G20 pledge to prevent Europe's debt crisis from undermining banks and financial markets had helped the euro and other higher risk currencies recover against the dollar, but investors were concerned that more concrete action was needed. The euro was down 0.1 percent at $1.3444, well below an earlier high of $1.3567 earlier and not far above an eight-month low of $1.3384 struck on Thursday on trading platform EBS. Traders cited selling by a large fund that triggered stops on a break below $1.3450.
"Amid rumours of a 50 percent haircut for Greece, euro/dollar is trading just above its lows and liable to break through there again if there is any more bad news," said Kit Juckes, currency strategist at Societe Generale. "The markets are fairly anxious and while the G20 does refer to eurozone officials looking to enhance the EFSF, there is a fair bit of gloom out there," said Gavin Friend, currency strategist at National Australia Bank.
Risk reversals continued to point to investors having to pay a high premium to buy options betting on euro falls against the dollar rather than euro gains, with one-month 25-delta risk reversals trading around 3.5 in favour of euro puts. The dollar index was steady at 78.461, not far form the previous day's seven-month high of 78.798. The dollar held steady at 76.22 yen, hovering near a record low of 75.941 yen hit in August. Trading in the pair was thin with Tokyo markets closed for a national holiday but Japan repeated its threat of currency intervention.
The euro fell 0.1 percent to 102.48 yen, edging close to Thursday's 10-year low of 102.211 yen. The Australian dollar - a proxy for global growth - turned 0.1 percent lower after earlier rising as much as 1 percent. It traded at $0.9708, having fallen to $0.9692 on Thursday, its lowest in nearly 10 months.