FOREX-Euro steady in thin trade, sentiment fragile

* Euro steadies, off lows vs Swiss franc, dollar

* Activity subdued as market in holiday mode

(Updates prices)

By Tamawa Desai

LONDON, Dec 24 (BestGrowthStock) – The euro was steady on Friday
after rebounding from a record low against the Swiss franc and a
three-week low versus the dollar, but any gains were curbed as
investors remained wary about euro zone debt problems.

Trade was extremely thin, with few orders going through so
close to the Christmas holidays, resulting in limited movement
in any major currency pair.

However, analysts said concerns about fiscal troubles in
some euro zone countries could result in further euro selling in
the new year.

The euro showed limited reaction to Fitch cutting Portugal’s
long-term and local currency ratings by one notch to A-plus on
Thursday, although this served as a reminder that sovereign debt
problems will stay a key theme for 2011. [ID:nN23149674]

“Euro negatives continue to abound and we’re set to open up
the new year with the same themes of peripheral debt problems,”
said Jeremy Stretch, currency strategist at CIBC.

“U.S. fundamentals are looking a little better, so net-net
the risks are to the downside for euro/dollar,” he said, but
added that while above $1.3050 the euro was likely to hold
steady over the coming days.

The euro was steady at $1.3121 (EUR=: ), off a three-week low
of $1.3055 set on Thursday.

The euro has managed to cling to its 200-day moving average,
now around $1.3089, for the past week, drawing support from
central bank buying as well as from anticipation that China may
step up its support for euro zone peripheral countries.

A breach of $1.3200 could trigger a move back towards the
Dec. 17 high around $1.3360.

“In this type of market condition, it’s very hard to take a
position because you’ll just get whipped out and that’s why
there are hardly any orders. People are waiting for January when
liquidity returns to work out what they want to do,” a trader at
a U.S. investment bank said.

“The euro is still a sell-on-rally trade. Anything above
$1.32 is worthwhile selling, in my view, and probably there
won’t be any buyers until the low $1.30s, where we could see
some Asian central bank interest.”

The euro was up 0.3 percent at 1.2614 Swiss francs
(EURCHF=R: ) having bounced off an all-time low around 1.2440 set
this week. However, the euro was still down some 1percent on the
week against the franc and down for the fifth week in a row.

Traders said heavy franc buying by hedge funds had helped
the single currency hit a series of record lows this week, to
the point where technical signals indicate an oversold market.

FITCH DOWNGRADE

Portugal’s downgrade puts its Fitch rating on a par with
Moody’s A1 rating, but still two notches above that of Standard
and Poor’s which rates Portugal A-minus.

“(Fitch’s move) was widely expected to some extent, and it
was one notch only so there was not much reaction,” said James
Ashley, macroeconomist at RBC Capital Markets.

The dollar was flat at 82.90 yen (JPY=: ), off a 1-1/2 week
low around 82.83 yen hit on Thursday. It was near the bottom of
a wider range between 82.40 and 84.40 seen since late November.

In contrast, the Australian dollar hit six-week highs at
$1.0067 on Thursday, and was last at $1.0041 (AUD=D4: ) on
interest from real money accounts looking for exposure to higher
yields and a brighter economic outlook.

The Canadian dollar outperformed, with the U.S. dollar down
0.3 percent at C$1.0060 (CAD=D4: ), helped by firmer oil prices,
which hovered around their highest in more than two years. [O/R]

(Additional reporting by Jessica Mortimer and Hideyuki Sano
in Tokyo; editing by Nigel Stephenson)

FOREX-Euro steady in thin trade, sentiment fragile