FOREX-China support steadies euro, outlook shaky into 2011

* Euro steady vs dollar, Swiss franc but outlook shaky

* China reiterates support for euro zone countries

* Dlr/yen breaks below key support, stops hit in thin trade

(Releads, changes dateline, adds quote, previous SYDNEY)

By Neal Armstrong

LONDON, Dec 23 (BestGrowthStock) – The euro steadied against the
dollar and the Swiss franc on Thursday, helped by supportive
comments from China, but analysts said the outlook for the
single currency was shaky, with fresh losses expected into 2011.

Liquidity was at a premium in currency markets ahead of
year-end, with traders saying flows were having a bigger impact
on price than fundamentals.

A Chinese Foreign Ministry spokeswoman said China was
willing to help countries in the euro zone return to economic
health and would support the International Monetary Fund bailout
package for the bloc. [ID:nBJI002501]

A Portuguese newspaper report on Wednesday suggested China
was ready to buy significant amounts of Portuguese debt to try
to instil confidence in the country’s ailing economy.

But the single currency’s outlook remained shaky at best and
more losses into 2011 are seen likely as the euro zone debt
crisis looks set to drag on.

“We expect further weakness for the euro by the end of the
first quarter of 2011, and in the near term a break of the
200-day moving average will be important,” said Elsa Lignos,
currency strategist at RBC Capital Markets.

The euro was flat against the dollar (EUR=: ) at $1.3100,
close to the 200-day moving average at $1.3091. In the past
week, the euro has fallen about 1 percent against the greenback.

The euro was flat at 1.2466 Swiss francs (EURCHF=: ), hovering
near an all-time low of around 1.2448 hit on Wednesday.

“As long as there are periphery concerns in the euro zone, a
lower euro/Swiss is very hard to fight,” Lignos said.

Investors have been flocking to the safe-haven status of the
Swiss franc and shifting out of euros on worries that the euro
zone debt crisis will rumble on.

“Our next target for EURCHF is 1.2400,” BNP Paribas
strategists said in a client note. “The CHF is currently driven
by capital rather than trade flows and thus remains well
supported against the EUR as deposit inflows continue.”

AUSSIE DOLLAR FIRM

The Australian dollar was back at parity against the
greenback thanks to optimism about the global economy, which has
supported commodity prices (.CRB: ) and global stocks
(.MIWD00000PUS: ).

The diverging moves showed investors favoured safe havens
like the Swiss franc within Europe, but that they were also keen
on currencies deemed riskier like the Aussie given the generally
more upbeat outlook, particularly for emerging economies.

Trading, however, was thin with Tokyo shut for a public
holiday and as the year-end holidays loomed.

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Euro zone debt struggle http://r.reuters.com/hyb65p

More on euro zone debt [ID:nLDE6T0MG]

On commodities [ID:nN22110135]

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The dollar was down around 0.7 percent at 82.95 yen (JPY=: )
after taking out stop-losses in thin liquidity. Traders said an
option barrier at 83.15 had been eroded in Asia, while support
at the top of the Ichimoku cloud gave way in Europe at 83.08.
The base of the cloud was seen as the next support, at 82.07.

Yen strength knocked the euro (EURJPY=R: ) down 0.6 percent to
108.78 yen, with a French bank highlighted as the major seller.

The dollar index (Read more about the global trade. ) (.DXY: ), which tracks the greenback’s
performance against a basket of major currencies, fell about 0.2
percent to 80.562.

Meanwhile, the New Zealand dollar stood at $0.7448, having
recovered from a brief fall below $0.7400 in immediate reaction
to data showing a contraction in the New Zealand economy for the
first time in six quarters. [ID:nL3E6NM1JJ]

(Additional reporting by Ian Chua)

FOREX-China support steadies euro, outlook shaky into 2011