Euro inches higher in Asia

The euro clawed higher on Wednesday and stayed above a one-week low hit the previous day, with markets cautiously optimistic that European leaders will take decisive action to contain the region's debt crisis at a summit later this week. The euro rose 0.3 percent to $1.3435, hovering above Tuesday's low near $1.3334. There was talk of light stop-loss bids in the euro at $1.3470 and also near $1.3500.
Still, the limited scope of the euro's bounce suggests that market players remain cautious about its outlook, said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong. Disappointing results could drag the euro down to levels near $1.3215, with a clear breach of that support opening the way for a drop to the $1.3140/50 area, he added.
Another key event this week is the European Central Bank's policy decision on Thursday. The ECB is likely to cut interest rates by 25 basis points to 1.0 percent. The Swiss franc stayed on the defensive versus the euro after a fall in consumer prices to two-year lows boosted speculation the Swiss central bank will weaken the currency further to shield the economy from the risk of deflation and recession.
The euro rose 0.2 percent against the Swiss franc to 1.2426. There was talk that hedge funds have been buying euro/Swiss franc call options with a strike price at 1.2500 francs that are due to expire in the next week or two. In addition, traders cited talk of a large euro/Swiss franc option barrier at 1.2500 francs. The Australian dollar rose 0.3 percent to $1.0277, holding firm after data showed Australia's economy grew a brisk 1.0 percent in the third quarter from the previous three months. The dollar held steady versus the yen at 77.73 yen.