Euro dangles above lows in Asia

The euro held its ground on Friday after rebounding from a record low against the Swiss franc and a three-week low against the dollar, but is expected to come under renewed pressure after market players return from the Christmas break. Traders said Thursday's rebound in the euro was overdue particularly against the Swiss franc after heavy buying by hedge funds had helped it hit a series of record lows this week to the point where technical signals indicate an oversold market.
But little action took place in Asia with volumes drying up heading into the Christmas holidays. US markets are shut on Friday along with many European centres. The single currency stood at $1.3130, off a three-week low of $1.3055 set on Thursday.
Versus the Swiss franc, it was at 1.2570 franc having bounced off an all-time low around 1.2440 set this week as the pair's oscillators, such as the RSI, showed the possibility of a near-term oversold position. The euro has managed to clutch to its 200-day moving average, now at $1.3091, for the past week, drawing some support from central banks' buying as well as from hopes that China may step up its support for euro zone peripheral countries.
A breach of $1.3200 could trigger a move back towards the December 17 high around $1.3360. Still, with no resolution in sight for the euro zone debt crisis, analysts said it was only time before the market took the euro lower. Portugal was the latest euro zone member to have its ratings cut, with Fitch downgrading the country's credit rating by one notch to A-plus with a negative outlook. France, however, secured a thumbs up from, which affirmed its AAA rating.
While the market is becoming accustomed to a rush of credit downgrades, concerns that the euro zone may eventually need more drastic measures, such as debt restructuring, are likely to shackle the euro, some market players also said. The cost of insuring Greek debt in credit derivatives hit a record high following an unsourced report from a Greek newspaper that Athens was seeking a possible debt restructuring deal after 2013. "The market got a bit of relief after euro zone countries secured financing deals. But is it sustainable to pay interest rates of more than 5 percent when the economy is contracting? That question may come to surface next year," said Kimihiko Tomita, head of forex at State Street Global Markets.
The dollar was at 83.03 yen, having hit 1-Â1/2 week lows around 82.83 on Thursday. It was near the bottom end of a wider range roughly between 82.40 and 84.40 seen since late November. In contrast, the Australian dollar has been going from strength to strength this week, hitting six-week highs at $1.0067 on Thursday. It was last at $1.0030 and expected to hold in a thin range around $1.0000 and $1.0060 on the day.
Traders said interest from real money accounts looking for exposure to high yields and the upbeat commodities story was helping to shore up the Aussie. Crude oil hit two-year highs above $91 a barrel, while copper held near the record high set earlier in the week, underpinned by more evidence the US economy was strengthening.