The euro dipped versus the dollar on Monday as a German official cast doubt over fresh aid for Greece, but it stayed near a one-month high as focus switched to rate differentials ahead of this week's ECB policy decision. The euro has risen almost 4 percent in the past three weeks against the dollar, hitting a one-month high of $1.4658 on EBS trading platform in Asian trade, as Greece has inched closer to securing fresh aid to stave off the threat of a default.
But the euro dropped to a session low just below $1.4600 after a spokesman for the German finance ministry said it was not certain there would be a second Greek bailout programme. It was last down 0.15 percent at $1.4612. Traders said the single currency could struggle to extend gains, with options barriers at $1.4700 reportedly being defended while demand to sell the euro was reported above $1.4660, just above the day's highs.
The European Union and IMF have made clear a new bailout package, which would replace a 110 billion euro deal agreed only a year ago, depends on Athens keeping to its promises for further austerity and accelerated privatisations. A new package might cost more than 100 billion euros ($144 billion), German news magazine Der Spiegel said. Despite no long-term solution in sight for the eurozone's debt crisis, the euro is expected to rise ahead of the European Central Bank's policy meeting on Thursday, when the bank is expected to prepare markets for an interest rate hike in July.
"We believe that the ECB is set to signal on Thursday that the next rate hike will be in July and this positive interest rate dynamic will continue to help the euro," said Elsa Lignos, currency strategist at RBC Capital Markets. Traders said hedge funds were keen buyers of the euro in European trade, while stop-loss orders were at $1.4670/80. Nearby resistance was at $1.4710 - the 76.4 percent retracement of the euro's decline in May. But given the negative sentiment building against the dollar, some analysts are targeting a move towards $1.50 in coming weeks.
Technical analysts expect the euro to remain supported as long as it stays above $1.4500. Euro gains were also helped by negative dollar sentiment. The dollar was stuck near a one-month low against a basket of currencies after Friday's jobs data bolstered expectations that US interest rates will stay low for longer. The dollar index dipped as low as 73.643 - a trough not seen since May 5 - after the closely watched non-farm payrolls report last Friday showed a sharp slowdown in job creation, pushing the unemployment rate up to 9.1 percent from 9.0 percent.
The US currency hit a one-month low against a broadly firmer yen of 79.97 yen according to electronic trading platform EBS. It did not sustain the move below 80.00 yen, however, with Asian sovereigns reported to be buying the dollar around the lows, and was last at 80.08 yen. Commodity currencies also benefited from weakness in the greenback. The Australian dollar was up 0.2 percent at $1.0740, near Friday's 3-1/2 week high of $1.0775. It remained some way off a 29-year peak of $1.1012 set on May 2.