FOREX-Euro off lows on Greek bond sale; Trichet eyed

Thu Mar 4, 2010 1:18pm GMT

* Euro off lows as Greek bond sale sees solid demand

* ECB holds rates steady, Trichet eyed

* Sterling up as BoE keeps rates on hold

(Adds quotes, updates prices, changes byline)

By Jessica Mortimer

LONDON, March 4 (Reuters) - The euro pared losses on Thursday after Greece's sale of 10-year bonds drew solid demand, while investors awaited comments from European Central Bank President Jean-Claude Trichet.

As expected, the ECB held rates at a record low 1.0 percent [ID:nFAE005615], with the market awaiting any comments from Trichet's press conference at 1330 GMT on plans for its gradual withdrawal from emergency lending measures. [ID:nLDE6220UL]

The market focus will be on whether there is any change to the extra liquidity the ECB has provided for the banking system, particularly a shift to competitive auctions for three-month operations, as well as any remarks on Greece.

Greece's highly anticipated bond sale drew strong demand [ID:nLDE6230PC], but investors were wary of whether the measures will be enough, keeping the euro below Wednesday's two-week high versus the dollar.

"We are seeing the euro gain slightly as it looks as though Greece were fortunate to get the bond away," said Chris Turner, currency strategist at ING.

"But there are still many execution and implementation risks and people are reluctant to chase the euro higher."

By 1253 GMT, the euro eased 0.1 percent to $1.3682, off an earlier low of $1.3634 but staying below the previous day's two-week high of $1.3736 hit on trading platform EBS.

Greece's bond sale comes a day after it unveiled plans for a further $6.5 billion in pay cuts and tax hikes to cut its deficit.

"If the mood regarding Greece improves further and Trichet is supportively hawkish, we will likely see the exchange rate re-test overnight highs," said Daragh Maher, deputy head of FX strategy at Credit Agricole CIB.

Data on Thursday confirmed euro zone economic growth at 0.1 percent in the last three months of 2009.

BOE DECISION

Sterling turned slightly higher on the day against the dollar GBP=D4, hitting a session high of $1.5120 after the Bank of England left interest rates at 0.5 percent and held fire on its quantitative easing programme. [ID:nLAC005660]

This was as expected, but analysts said there was relief among some investors that the bank did not expand QE following some recent weak UK data.

Elsewhere, the yen was broadly firmer, with the dollar falling to a three-month low of 88.14 yen, dragged down by falls in yen crosses and short-term speculators aiming to trigger loss-cutting orders below 88.00 yen.

Comments from a deputy governor of China's central bank that Chinese inflation expectations can be controlled [ID:nTOE62301C] also prompted traders to cut long dollar/yen positions.

The dollar was last down 0.1 percent at 88.31 yen JPY=.

Traders expect it to hold above the psychologically key 88.00 yen level, but direction may be determined by Friday's U.S. jobs data. ECONUS

The dollar index .DXY was up 0.1 percent at 80.025. Short-term support is seen around the 79.6 area, its February low.

(Additional reporting by Tamawa Desai; Editing by Susan Fenton)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.