FOREX-Euro dips, still fragile after bounce off 4-yr low

* Euro dips after rebounding off 4-yr low on short-covering

* US Senate votes “no” on IMF aid to troubled nations

* Widening in Portugal, Greece CDS underscores euro’s woes

* Some scope for near-term bounce, but downtrend seen intact

By Masayuki Kitano

TOKYO, May 18 (BestGrowthStock) – The euro dipped on Tuesday, its
trend seen weak despite a rebound from a four-year trough, due to
persistent investor jitters over the euro zone’s fiscal woes and
concerns that austerity steps could hurt the region’s growth.

The single currency edged lower, giving back some of the
gains it made the previous day on short-covering.

News that the U.S. Senate had passed a measure under which
the United States would oppose International Monetary Fund
bailout packages to countries that are not likely to repay them
weighed on the euro. [ID:nN17107822]

That caused market players to fret about the potential impact
on any future IMF measures to help ease the euro zone’s debt
crisis and prompted some euro-selling, although there was
uncertainty about just how much tangible impact the U.S. Senate
decision would have.

The senate vote may be more of a political gesture than
anything else, said Koji Fukaya, senior currency strategist at
Deutsche Securities.

“There have been a bunch of things that have come up that
seem to be aimed at the elections,” Fukaya said, referring to
November’s U.S. midterm congressional elections.

The United States is the IMF’s largest contributor and has
veto power to block decisions, but has never used it.

The euro slipped 0.6 percent to $1.2317 (EUR=: ) but remained
above its four-year trough of $1.2234 struck on Monday on trading
platform EBS.

The euro fell (Read more about the trembling euro. ) 0.9 percent against the yen to 113.79 yen
(EURJPY=R: ), heading back in the direction of an eight-year low of
110.49 yen struck earlier this month on EBS.

Traders cited talk of active selling in sterling by a
European bank. Such flows helped push sterling down 0.5 percent
against the dollar to $1.4417 (GBP=D4: ), and helped drag the euro
lower against the dollar as well, they said.

SHORT-COVERING BOUNCE?

Despite the euro’s retreat on Tuesday, some traders said the
currency may be poised to rise further over the course of the
week, given the potential for further short-covering.

U.S. Commodity Futures Trading Commission data released last
week showed that currency speculators boosted their net short
position in the euro to a record high in the week ended May 11.
[IMM/FX]

One upside target on Tuesday may be $1.2445, the 61.8 percent
retracement of its fall from Friday’s high near $1.2575 to
Monday’s four-year low of $1.2234.

On the downside, the next key support for the euro lies near
$1.2135, the 50 percent retracement of the rally from the
all-time lows near 82 U.S. cents to record highs just above
$1.60.

Traders said that while the euro may consolidate and start to
form a near-term bottom, it was premature to think that its
longer-term downtrend was drawing to a close, and its moves were
likely to stay choppy.

“It is still hard to see how the problems in Europe stemming
from Greece will come to an end. It is hard to say what would
convince everyone that it is over,” said Minoru Shioiri, chief
manager of FX trading at Mitsubishi UFJ Morgan Stanley
Securities.

“That is what’s most troubling about this issue,” Shioiri
said, noting that credit default swap costs for Portugal and
Greece jumped on Monday. [ID:nN17272379]

The Australian dollar fell 0.7 percent to $0.8714.

It fell to as low as $0.8709 earlier after minutes from the
Reserve Bank of Australia’s (RBA) policy meeting showed it
thought its rate rise on May 4 left monetary policy well placed
for the present. [ID:nSYC002331]

Investing Advice

(Additional reporting by Kaori Kaneko, Anirban Nag in Sydney;
Editing by Joseph Radford)

FOREX-Euro dips, still fragile after bounce off 4-yr low