* Euro up 0.5 pct at $1.3480 <EUR=>
* Greece launches 7-year bond; focus on results
* Euro supported by short covering for now
By Naomi Tajitsu
LONDON, March 29 (Reuters) - The euro trimmed gains against
the dollar on Monday, pulling away from a session high after
Greece's launch of a highly-anticipated sovereign bond issue
highlighted its need to refinance its ballooning debts.
Greece opened its book on a seven-year benchmark euro bond
with a price guidance around mid-swaps plus 310 basis points,
lead managers said. []
Athens said the issuance size would be around benchmark
levels, after it raised 5 billion euros with a benchmark 10-year
bond earlier in the month.
The euro had risen earlier on short-covering after euro zone
leaders agreed on a financial safety net for Greece late last
week, but the market remains wary about deficit problems facing
Greece and other euro zone peripheral countries.
Analysts said Greece was testing the waters for sovereign
debt demand in the aftermath of last week's European Union
summit, adding that the sale's success may impact the euro.
"If the offer goes reasonably well, if Greece can get a
lower yield than the current market rate, that's going to be
positive for the euro," said Adarsh Sinha, currency strategist
at Barclays Capital in London.
"But on the flipside, if it doesn't go well, we could see
the euro selling off again."
By 1053 GMT, the euro was up 0.5 percent from late U.S.
trade on Friday at $1.3480 <EUR=>, having pulled back from the
day's high of $1.3506 after Greece announced its the debt issue.
The spread between Greek and benchmark German 10-year
government bonds widened to 311.5 basis points from 306 basis
points after the announcement.
SHORTS STRETCHED
The euro hovered in a $1.3450-1.3500 range on Monday, hemmed
by options set to expire later in the day. Around 150 million
euros' worth of $1.3450 options and 300 million euros of $1.35
options tick over on Monday, IFR reported.
The single European currency has rebounded from a 10-month
low of $1.3267 on trading platform EBS last week, when concerns
about fiscal problems in the euro zone drove selling.
Such selling had pushed short euro positions to record high
levels, which some in the market said may prompt some traders to
scale back bets to push the euro lower. Traders said this was
helping to drive the early squeeze higher on Monday. []
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http://graphics.thomsonreuters.com/310/EZ_ERCFTC0310.gif
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But many analysts said ongoing fiscal issues facing Greece
and other euro zone countries would keep the euro under selling
pressure in the coming months.
"The EU agreement on Greece instilled some confidence and we
are seeing a degree of a relief rally although a modest one,"
said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi
UFJ.
But he added: "Greek yields are still elevated, and Greece
is not out of the woods yet by any stretch of the imagination."
The EU agreed late last week that Athens would get
coordinated bilateral loans from other euro zone countries and
the International Monetary Fund only if it faced severe
difficulties. []
Traders ignored data showing a pick-up in regional German
inflation in March and separate figures showing an improvement
in euro zone economic sentiment. [] []
The dollar <JPY=> was little changed on the day at 92.48
yen, retreating from the day's high around 92.78 yen on selling
by Japanese exporters before the fiscal year-end on Wednesday.
Traders said the market was positioning for an improvement
in monthly U.S. jobs data, due out on Friday, with a pick-up in
the labour market seen as a key indicator for U.S. rate policy.
The Australian <AUD=D4> and New Zealand dollars <NZD=D4>
both gained 1.0 percent on the day. The Aussie was helped by
hawkish comments from Reserve Bank of Australia Governor Glenn
Stevens. []
(Additional reporting by Tamawa Desai; graphics by Scott
Barber; Editing by Ron Askew)
