Euro rises in London

The euro rose on Tuesday as investors bet Greek Prime Minister George Papandreou would survive a confidence vote, a key hurdle the country must clear to avert a debt default. Traders were wary of holding short euro positions going into the parliamentary vote due later in the day.
But analysts warned that even if Papandreou survives, euro gains would be short-lived as that would not necessarily guarantee that Greece would be able to pass new austerity measures on June 28. "We should see cautious trading ahead of the Greek vote and if it is passed euro/dollar should react positively," said Roberto Mialich, currency strategist at Unicredit in Milan, who expected gains to be capped below $1.4450.
The euro was up 0.3 percent at $1.4355, recovering from an initial slip after a survey showed German investors in June took their most bearish view about the eurozone's largest economy in over two years. Its topside was limited as market participants cited selling by Asian sovereign participants above $1.4360, while offers were reported around $1.4380-85.
Technical resistance lay around $1.4410, the 55-day moving average, while market participants expected the euro would also struggle to push above $1.4451, a high hit on June 15. In the options market, one-month euro/dollar risk reversals traded around 2.8 percent in favour of bets on the euro falling, or puts. This was near the highest level since the eurozone's debt problems flared up in May-June 2010.
Implied volatility on one-month euro/dollar options stood around 13 percent, well within range of a high around 14 percent hit last week. The euro pared gains after Fitch Ratings said it would regard both a Greek sovereign debt swap and a rollover of maturities, even a voluntary one, as a default.
Support for the euro prodded the dollar down 0.3 percent against a basket of currencies to 74.810. The US currency was slightly lower versus the yen at 80.15 yen, and was largely on the back foot before the Federal Reserve ends a policy meeting on Wednesday, its first since weaker run of US economic data in the past month or so. The Australian dollar was steady at $1.0577, underperforming after the minutes of the Reserve Bank of Australia's June meeting showed the bank thought recent data had not added urgency to the need for tightening.