FOREX-Euro edges up vs dollar as investor gloom eases

* Euro up on short covering, stabilises after Monday’s slide

* Overall euro outlook remains bleak due to debt crisis

* EU finance ministers meet in Brussels

By Naomi Tajitsu

LONDON, May 18 (BestGrowthStock) – The euro edged up in choppy trade
on Tuesday, holding steady above the previous day’s four-year
lows, as investors grew slightly less pessimistic over euro zone
countries’ ability to tackle their debts.

This prompted some investors to unwind their bets against
the euro, which has tumbled in recent weeks over concerns a
sovereign debt crisis in Greece could spread.

Reports Greece was starting to receive emergency aid came as
the 10-year Greek/German government bond yield spread tightened
and the cost of insuring against a Greek default fell, helping
to support the euro.

A slight rise in European shares suggested a cooling in risk
aversion, providing an opportunity for investors to cover short
euro positions, which reached a record high last week. [IMM/FX]

“Some of the market instability has started to subside, at
least for the moment,” said Robert Minikin, currency strategist
at Standard Chartered.

He added that reports, citing a Greek bank source Athens had
received 14.5 billion euros in aid from the European Union on
Tuesday were also helping to support the euro as this suggested
that aid to Greece was on track. [ID:nATH005480]

However, analysts said the euro zone debt crisis and worries
that austerity steps may hurt regional growth would nag the
European common currency.

The euro (EUR=: ) rose to a session high of $1.2433,
recovering from a slide to $1.2315 in earlier trade. By 0933
GMT, it traded at $1.2390, unchanged on the day.

The euro lost some ground after German think tank ZEW said
its survey on economic sentiment in May fell more than expected.
[ID:nLDE64H0T1]

But the currency stayed above $1.2234, hit on Monday for the
first time since April 2006.

Analysts said investors were looking for a chance to unwind
some short positions. [IMM/FX]

Still, market participants said a climb to $1.2457, the
euro’s 2009 low, was likely to trigger selling, indicating the
euro’s downtrend remained intact.

“We expect to see a break lower. The fundamental story
remains for the dollar to strengthen against the euro,” said
Kasper Kirkegaard, currency strategist at Danske in Copenhagen.

A 0.6 percent rise in European share prices (.FTEU3: ) also
suggested lower risk aversion on Tuesday, dampening safe-haven
demand for the dollar. The U.S. currency was little changed
versus a currency basket (.DXY: ) at 86.239, though not far off
the 87.063 hit on Monday, its highest since March 2009.

Against the yen, the dollar (JPY=: ) was also little changed
at 92.70 yen.

EURO SHORTS

Investors awaited a meeting of EU finance ministers later in
the day, when they are expected to smooth out details of a $1
trillion plan to prevent debt problems plaguing Greece from
spreading to other euro zone countries. [ID:nLDE64G290]

Spain and Portugal, which are seen at risk of falling into a
debt crisis, have agreed to pursue extra austerity measures.

The European Central Bank laid out on Monday plans to
sterilise its government bond purchases. [ID:nLDE64G1O9]

It said 16.5 billion euros worth of bond purchases had been
settled by Friday and on Tuesday called for bids from banks to
deposit one-week funds to mop up the extra liquidity.

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FOREX-Euro edges up vs dollar as investor gloom eases