Euro steadies in London

The euro was steady on Friday after rebounding from a record low against the Swiss franc and a three-week low versus the dollar, but any gains were curbed as investors remained wary about eurozone debt problems. Trade was extremely thin, with few orders going through so close to the Christmas holidays, resulting in limited movement in any major currency pair.
However, analysts said concerns about fiscal troubles in some eurozone countries could result in further euro selling in the new year. The euro showed limited reaction to Fitch cutting Portugal's long-term and local currency ratings by one notch to A-plus on Thursday, although this served as a reminder that sovereign debt problems will stay a key theme for 2011.
"Euro negatives continue to abound and we're set to open up the new year with the same themes of peripheral debt problems," said Jeremy Stretch, currency strategist at CIBC. "US fundamentals are looking a little better, so net-net the risks are to the downside for euro/dollar," he said, but added that while above $1.3050 the euro was likely to hold steady over the coming days.
The euro was steady at $1.3121, off a three-week low of $1.3055 set on Thursday. The euro has managed to cling to its 200-day moving average, now around $1.3089, for the past week, drawing support from central bank buying as well as from anticipation that China may step up its support for eurozone peripheral countries.
A breach of $1.3200 could trigger a move back towards the December 17 high around $1.3360. "In this type of market condition, it's very hard to take a position because you'll just get whipped out and that's why there are hardly any orders. People are waiting for January when liquidity returns to work out what they want to do," a trader at a US investment bank said.
"The euro is still a sell-on-rally trade. Anything above $1.32 is worthwhile selling, in my view, and probably there won't be any buyers until the low $1.30s, where we could see some Asian central bank interest." The euro was up 0.3 percent at 1.2614 Swiss francs having bounced off an all-time low around 1.2440 set this week. However, the euro was still down some 1percent on the week against the franc and down for the fifth week in a row.
Traders said heavy franc buying by hedge funds had helped the single currency hit a series of record lows this week, to the point where technical signals indicate an oversold market. Portugal's downgrade puts its Fitch rating on a par with Moody's A1 rating, but still two notches above that of Standard and Poor's which rates Portugal A-minus.
"(Fitch's move) was widely expected to some extent, and it was one notch only so there was not much reaction," said James Ashley, macroeconomist at RBC Capital Markets. The dollar was flat at 82.90 yen, off a 1-1/2 week low around 82.83 yen hit on Thursday. It was near the bottom of a wider range between 82.40 and 84.40 seen since late November.
In contrast, the Australian dollar hit six-week highs at $1.0067 on Thursday, and was last at $1.0041 on interest from real money accounts looking for exposure to higher yields and a brighter economic outlook. The Canadian dollar outperformed, with the US dollar down 0.3 percent at C$1.0060, helped by firmer oil prices, which hovered around their highest in more than two years.