The euro struggled to stay above the $1.30 (Dh4.70) level against the dollar in Asia yesterday after slithering from a three-week peak on news that Eurozone finance ministers rejected an offer by private creditors to restructure Greek debt, keeping alive default fears.
The euro slipped as low as $1.2987 before steadying at $1.3005. On Monday it had jumped more than one per cent to a high of $1.3053 on the EBS trading platform as hopes of an eventual Greek deal drove a wave of short-covering.
"The euro's moves are familiar, with positive news leading some to cover their short positions, followed by a correction as investors sell into the rallies," said Koji Fukaya, chief currency analyst at Credit Suisse in Tokyo.
The euro hit a session low after a report rekindled fears that Portugal, seen as the second most risky country in the Eurozone, could be the next potential default candidate after Greece.
Many Asian centres are closed for the Lunar New Year holidays, making volumes thinner than usual and amplifying market moves, traders said.
Further dousing optimism, Germany denied a report that it was ready to boost the combined firepower of the Eurozone's rescue funds to €750 billion ($979 billion).
But the euro's biggest move of about 30 ticks came after Eurozone finance ministers sent the Greek debt restructuring offer back to the drawing board.
Against the yen, the euro hit a near four-week high of 100.49 on Monday before retreating to a low of 100.03 yen and steadying at 100.19 in Asia, still well off an 11-year EBS low of 97.04 marked on January 16.
The euro's retreat helped the dollar index rise off a three-week low of 79.602 hit on Monday to stand at 79.849.
Still off its nadir
Despite the pullback, the euro was still well off its 17-month nadir of $1.2624 (Dh4.63) hit on January 13, leading some to wonder if it might have bottomed.
Resistance is now seen around $1.3077/$1.3100, the January 3 EBS high and a 38.2 per cent retracement of the November-January slump. But a break above the October low of $1.3145 is still needed to turn the picture positive, traders said.