Euro hovers off lows in Asia

The euro on Tuesday hovered above a four-month trough hit the previous day, after Japan said it may buy about a fifth of the bonds a European rescue fund plans to sell later this month to finance its bailout scheme for Ireland. But Finance Minister Yoshihiko Noda suggested Japan would use its euro cash holdings to buy the bonds, dampening some of the initial excitement from traders who had thought the move might involve fresh buying of the European currency.
The euro could easily return to its current downtrend given mounting worries over this week's heavy schedule of debt offers by southern European countries, market players said. The common currency last traded at $1.2940, down 0.1 percent from late New York levels, having risen as high as $1.2992 following Noda's comments. The euro stayed below its 200-day moving average at $1.3072 and remained within easy reach of Fibonacci support at $1.2794, the 61.8 percent retracement of a June to November rally.
The focus this week is on whether Lisbon will be able to raise funds in the debt market on Wednesday or be forced to turn to the EU and IMF for financial aid. Markets have already pushed the 10-year Portuguese yield to a punishingly high 7.1 percent, compared with 2.9 percent for safe-haven Germany.
The euro climbed on the crosses, rising to 107.50 yen from a four-month low of 106.83 yen set on Monday. It was steady against the Swiss franc at 1.2530 francs from Monday's low of 1.2432. The Swiss franc was restrained in part by talk the authorities could again try to curb the currency's strength. The Swiss economy ministry has called business leaders for a meeting this Friday to discuss possible remedies.
The pause in the euro's decline saw the dollar index retreat from a six-week peak around 81.313 set overnight. The index, which tracks the greenback's performance against a basket of major currencies, was last at 80.97. The dollar bought 83.00 yen, a gain of 0.4 percent on the day following Japanese importers bids, though it is still down from a recent high of 83.70 yen.
As the dollar's broad recovery continues, the Australian dollar tanked, with the news of more floods in the country's north-east prompting speculators to take profits on the Aussie's rally to a 28-year high near $1.0260 set on December 31. The Aussie fell more than one percent on the day to hit a one-month low of $0.9820, slipping below trendline support around $0.9856 as the massive floods. The Aussie declined sharply against the euro, which rose 1.3 percent to A$1.3158 after the European currency fell to an all-time low of A$1.2910 in late December.