Euro hovers below peak in Asia

The euro hovered below a one-month high on Monday, with market players saying clearer signs of progress on the eurozone's sovereign safety net are needed for the currency to make significant gains. Traders suspect a large portion of the bets against the euro were cleared in a big bout of short-covering last week, suggesting limited gains in the near-term.
Attention is focused on the eurozone's finance ministers' meeting on Monday, where an increase in the effective lending capacity of the rescue fund is expected to be dominate discussion. "There could be a further upside for the euro if confidence in the rescue scheme grows. But I think the euro has already risen to pretty good levels," said a trader for a Japanese trust bank in Tokyo.
The euro fell 0.4 percent to $1.3332, off a one-month high of $1.3458 hit on Friday. The euro's rally last week stalled after it rose on Friday to levels above $1.3404, a 38.2 percent retracement of its November to January slide. Traders said euro-selling by Japanese exporters was a factor weighing on the single European currency, which fell 0.4 percent to 110.54 yen, down from Friday's one-month high of 110.99 yen.
Uncertainty about whether Germany would support an increase in the lending capacity of the rescue fund, known as the European Financial Stability Facility (EFSF), clouded the euro's outlook. Market players want to see enough common ground among the eurozone's finance ministers to suggest that some kind of agreement is possible in coming months, said Robert Ryan, FX strategist at BNP Paribas in Singapore.
The euro staged a sharp comeback last week from a four-month low of $1.2860, helped by solid debt auctions from Spain and Portugal, hawkish comments on inflation from Trichet and hopes that euro zone policy makers may expand their rescue funds. Many market players expect the currency to meet hefty resistance around $1.35, its December 14 high. Its 90-day moving average comes in at $1.3489.
The dollar was fetching 82.90 yen, up 0.1 percent from late US trade on Friday and within its well-worn range in the past weeks. The Australian dollar dipped 0.2 percent to $0.9870, having fallen sharply on Friday after China's central bank raised lenders' required reserves by 50 basis points, though it is off last week's one-month low of $0.9803.