* Yen falls after major earthquake in Japan
* Euro edges up, focus on Friday's EU summit
* Short-term bias remains positive for the euro
* Aussie recovers after steep losses
By Gertrude Chavez-Dreyfuss
TOKYO, March 11 (Reuters) - The yen fell broadly and slumped
to a two-week low against the dollar on Friday after a major
earthquake struck Japan and triggered a slide in Japanese
shares.
The dollar climbed to as high as around 83.29 yen, the
dollar's highest since Feb. 22, rising from around 82.80 yen on
news of the quake, which the U.S. Geological Survey said was
measured at magnitude 8.9.
Tokyo shares extended their losses, and JGB futures surged
after the earthquake.
The dollar last stood at 83.15 yen up 0.2 percent
from late U.S. trade on Thursday. The euro climbed 0.4 percent
against the yen to 114.84 yen .
The euro rose 0.1 percent against the dollar to $1.3815
, stabilising after steep falls in the previous session
but it remained vulnerable to a sell-off if a euro zone summit
later in the day fails to ease concerns about sovereign debt.
For now, the single currency remains on an upward bias in
the short term on the technical charts. But it needs to stay
above $1.3777, a touch higher than Thursday's low in order to
maintain its bullish momentum.
A daily close below $1.3777 would probably push the euro to
$1.3591, a 38.2 percent Fibonacci retracement of the January to
early March rally, analysts said.
Some analysts said a "buy-on-dips" strategy makes sense for
the euro as the prospect of a series of rate hikes by the
European Central Bank should underpin the currency this year.
"Any disappointment with the policy response to the
sovereign debt crisis should challenge the euro near term,
especially as investors remain overly optimistic about the
prospects of a resolution," said Gabriel De Kock,
currency strategist at Morgan Stanley in New York.
"However, we expect broad-based gains after ECB rate hikes
get under way, most likely in April."
Euro zone leaders meet on Friday, ahead of a full 27-nation
European Union summit on March 24-25, to tackle the region's
debt crisis. There was some nervousness before Friday's meeting,
but that has since dissipated as investors are not expecting any
major announcement that could appease worries about the debt
crisis.
Moody's also turned up the heat on Europe this week,
slashing Greece's credit rating by three notches and Spain by
one and threatening more downgrades. That has weighed on the
euro since hitting four-month highs last Monday.
"These gains in the euro are all about positioning," said
Yuki Sakasai, currency strategist at Barclays Capital in Tokyo.
"People are cutting their positions on the euro ahead of the EU
summit later today. There was a lot of nervousness ahead of that
meeting, but things have calmed down a bit because we're not
expecting any concrete solution from that meeting."
Implied volatility on the euro versus the dollar edged
higher across the curve in line with the single currency's fall
in the spot market on Thursday. One-month implied volatility on
euro/dollar, for instance, hit as high as 10.35 percent from
Thursday's peak of 10.25 .
Traders are expecting sharp moves over the next 30 days with
the European Union heads of state summit on March 24-25 and a
possible rate hike by the European Central Bank in early April.
Sentiment on the euro has also deteriorated a bit in the
options market, with one-month 25 delta risk reversals showing a
bias for puts at -1.700 vols on Friday. Earlier in
the week, one-month euro/dollar puts were at -1.125 vols, higher
than current levels and in line with the euro hitting four
month peaks above $1.4035.
Currency bid prices at 1:09 a.m. EST (0609 GMT). All data taken
from Reuters calculated from the levels at 4:30 p.m.(2130 GMT)
in the previous New York session.
Last US Close Pct YTD Pct 2010
March 10 Change Change Close
-------------------------------------------------------------
Euro/dlr 1.3821 1.3792 +0.21 +3.32 1.3377
Dlr/yen 83.000 82.880 +0.14 +2.28 81.150
Euro/yen 114.74 114.34 +0.35 +5.62 108.63
Dlr/swiss 0.9321 0.9320 +0.01 -0.15 0.9335
Stg/dlr 1.6062 1.6053 +0.06 +2.97 1.5599
Dlr/cad 0.9749 0.9751 -0.02 -2.19 0.9967
Aus/dlr 1.0013 1.0004 +0.09 -1.86 1.0203
Euro/swiss 1.2884 1.2855 +0.23 +3.17 1.2488
Euro/stg 0.8602 0.8590 +0.14 +0.35 0.8572
Nzd/dlr 0.7346 0.7346 0.00 -5.71 0.7791
Dlr/Norw 5.6373 5.6560 -0.33 -3.17 5.8218
Euro/Norw 7.7980 7.8028 -0.06 +0.11 7.7895
Dlr/Swed 6.3719 6.3952 -0.36 -5.04 6.7098
Euro/Swed 8.8102 8.8270 -0.19 -1.90 8.9809
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(Additional reporting by Ian Chua in Sydney)
