The euro struggled higher in Asia on Thursday, moving away from a fresh 16-month low hit overnight, but its gains were capped ahead of a bond sale by Spain that is seen as a test of confidence in Europe's ability to meet its funding needs. The single currency edged up 0.1 percent to $1.2714, after earlier bouncing off support at $1.2700, ahead of an option barrier at $1.2650 and another said to lie at $1.2590.
The euro fell as low as $1.26615 on trading platform EBS in New York on Wednesday. Resistance is seen at the overnight high around $1.2790. Against the yen, the euro added 0.1 percent to 97.75 yen, rising from a session low of 97.67 yen. Support is seen at an 11-year low of 97.28 set on Monday on EBS.
While speculative euro positions remain short, many Japanese exporters are said to be long euro, and are likely to sell into any upside moves. "Regarding flows, Japanese manufacturers have huge positions in euro/yen, some at 110 yen, and they couldn't sell at these current levels," said Citibank Japan's chief strategist Osamu Takashima. Earlier euro weakness helped drive the dollar index to a fresh 16-month peak at 81.493 on Wednesday, before it fell back to stand at 81.271.
Against the yen, the greenback held steady below 77.00, at 76.89 yen. Commodity currencies including the Australian dollar took the Chinese data in their stride but edged down a bit, with the Aussie buying $1.0296, well above Wednesday's session low around $1.0263. Resistance lies at the trendline drawn from the October 27 high around $1.0340, with the Tenkan line at $1.0266 serving as immediate support. The New Zealand dollar hit a fresh two-month high at $0.7980 but was last down 0.2 percent at $0.7953. Sterling edged down to buy $1.5321, after thudding about 1 percent overnight against the greenback to a three-month low of $1.5308.
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