* Euro trims losses vs dollar after strong German auction
* Sterling rises on short covering after BoE minutes
* Dollar/yen under pressure, traders cite stops at 85.20 yen
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By Naomi Tajitsu
LONDON, Aug 18 (Reuters) - The euro cut losses against the
dollar on Wednesday after a German government bond auction
attracted solid demand, while sterling rose after Bank of
England minutes were less dovish than expected.
The dollar came under fresh selling pressure against the
yen, easing towards recent 15-year lows on growing speculation
that Japanese authorities are unlikely to intervene to counter
their currency's recent strong run.
The euro recovered from the day's low after a 5 billion euro
sale of German 10-year debt produced a record-low average yield
of 2.37 percent. An auction of Portuguese T-bills also went
smoothly. [] []
Analysts said that in the absence of big events or economic
data in the euro zone, investors had taken the successful
auctions as a cue to pick up the single currency.
"Whenever we see strong euro zone debt auction results, the
euro will get a tailwind," said John Hydeskov, senior currency
analyst at Danske in Copenhagen.
By 1126 GMT, the euro was flat on the day against the dollar
at $1.2875 <EUR=>, pulling away from the day's low around
$1.2825.
The euro was supported at around $1.2845, the 50 percent
retracement of the single currency's fall from its March 17 high
of $1.3817 to its four-year low of $1.1876 struck on June 7.
The euro has recovered from this week's low of $1.2732 on
robust responses to Irish and Spanish debt auctions, although
investors remain cautious about going long on the single
currency due to worries about peripheral euro zone economies.
"Sovereign debt jitters refuse to die down," said Neil
Mellor, currency strategist at Bank of New York Mellon. "Spreads
for Greek, Italian and Portuguese debt remain elevated, despite
the good responses to Irish and Spanish debt auctions this week.
So we should see that impacting the euro."
The 10-year Greek/German government bond yield spread
<GR10YT=TWEB> <DE10YT=TWEB> remained high at 853 basis points.
The equivalent spread on Portuguese bonds <PT10YT=TWEB> was flat
at 284 basis points.
STERLING CLIMBS
The pound <GBP=D4> traded 0.3 percent higher at $1.5640. It
hit the day's high after minutes from the BoE's policy meeting
earlier this month showed an 8-1 vote to hold interest rates at
a record low 0.5 percent. []
One policymaker voted in favour of a rate rise.
Sterling recovered from a three-week low hit earlier in the
day on talk the BoE minutes could reveal a three-way split
decision, which would have meant one member voting for an
increase in the central bank's quantitative easing programme.
Traders reported option-related offers at $1.5660/90, which
were seen capping the pound's gains.
The dollar shed 0.3 percent against the yen to 85.28 yen
<JPY=>, not far from a 15-year low of 84.72 yen hit on trading
platform EBS last week. Traders cited stops at 85.20 yen which
could check the dollar's fall.
"Dollar/yen is headed towards the 85 yen level and there is
little that can be done to prevent that," said Kenneth Broux,
markets strategist at Lloyds TSB Financial Markets.
Japanese authorities seem unlikely to conduct yen-selling
intervention unless the currency's rise accelerates sharply,
market players say. Speculation about intervention has mounted
ahead of a meeting between Prime Minister Naoto Kan and Bank of
Japan Governor Masaaki Shirakawa expected next Monday.
The Canadian dollar was higher against the greenback at
C$1.0299 <CAD=D4> having surged on Tuesday after BHP Billiton
<BLT.L> <BHP.AX> launched an unsolicited $38.6 billion bid for
Canada's Potash Corp. []
(Additional reporting by Anirban Nag; editing by Stephen Nisbet)
