FOREX-Euro inches up on short covering, Fed awaited

* Euro edges up on short covering, dollar slips

* Investors await FOMC minutes, BoE minutes also due

(Adds comment, details, updates throughout; previous TOKYO)

By Naomi Tajitsu

LONDON, Feb 17 (BestGrowthStock) – The euro inched up against the
dollar and the yen on Wednesday as traders covered short
positions in the single European currency as the flow of news
about Greece’s fiscal problems stalled for the moment.

Holding the euro near a one-week high against the dollar was
a slide in risk aversion as global share markets and commodity
prices extended gains, although traders were prepared to dump
risky assets should more news about Athens’s debt woes emerge.

Market participants also awaited minutes from the Federal
Reserve’s January policy meeting to be released later in the day
to see if they offer any more insight into an exit strategy from
the U.S. central bank’s loose monetary policy.

European ministers on Tuesday took a tough stance on Greece,
telling Athens it may need to take further steps to brings its
swollen debts under control. [ID:nLDE61F0XT]

But analysts said investors were taking a lack of
developments on the issue as a cue to trim bets that the euro
will weaken, after concerns about Greece knocked the euro down
nearly 10 percent against the dollar since December and raised
net euro short positions to a record high last week.

However, Ulrich Leuchtmann, currency analyst at Commerzbank
in Frankfurt, said investors were still cautious as uncertainty
remains longer term about Greece’s debt problems.

“Another pullback in the euro is still a possibility because
there’s still a huge amount of euro shorts in the market,”
Leuchtmann added.

By 0842 GMT, the euro (EUR=: ) traded 0.1 percent higher on
the day at $1.3780, having edged up to around $1.3690 in early
European trade, its highest since Feb. 11.

It rose 0.4 percent to 124.52 yen (EURJPY=R: ).

The dollar index (Read more about the global trade. ) (.DXY: ) slipped by the same amount as the
perceived safe-haven status of the U.S. currency was tarnished
somewhat by a 1.0 percent rise in European shares (.FTEU3: ),
suggesting that investors were creeping into high-risk assets
after a recent bout of risk aversion.

FED MINUTES

Despite its losses against the euro and a currency basket,
the dollar (JPY=: ) rose 0.2 percent to 90.34 yen as the yen also
came under some selling pressure against higher-yielding
currencies.

Sterling (GBP=D4: ) was little changed against the dollar as
traders awaited minutes from the Bank of England’s policy
meeting earlier this month, at which it decided not to increase
its asset-buying programme in February.

Later in the day, the Fed will release the minutes from its
meeting of Jan. 26-27, when policy makers maintained a pledge to
hold interest rates near zero. [ID:nN16236616]

But a dissenting note from Kansas City Federal Reserve Bank
President Thomas Hoenig has sparked discussion that monetary
tightening could be approaching.

Fed Chairman Ben Bernanke last week offered details on how
the central bank will begin to wean the economy off its
extraordinary monetary stimulus.

Although he released his plans after the Fed meeting, some
analysts said the dollar may gain if the minutes instil
confidence the Fed is nearing a position to absorb excess
liquidity in the market, the first step towards monetary
tightening.

Stock Market News

(Additional reporting by Tokyo Forex Team, editing by Stephen
Nisbet)

FOREX-Euro inches up on short covering, Fed awaited