* Euro bounces back to trade close to flat on the day vs dlr
* Greek auction results provide short-term support
* Losses made after Moody's Portugal downgrade are erased
(Adds details, updates prices)
By Neal Armstrong
LONDON, July 13 (Reuters) - The euro pared losses on Tuesday
after a smooth Greek treasury bill auction offset the negative
effects of an earlier ratings downgrade on Portugal.
Greece's Public Debt Management Agency (PDMA) sold 1.625
billion euros ($2.03 billion) of 6-month T-bills on Tuesday at a
cheaper cost than it pays to borrow under its 110 billion euro
EU/IMF rescue fund, and marking its first debt auction since the
backstop was agreed in May. []
"We were expecting a good result, and it's good for Greece
and the euro, but Greece has a long way to travel, as its
economic challenges are pretty severe." said Paul Robinson, FX
strategist at Barclays Capital.
"It's going to take years for Greece to figure this out, not
just one auction."
By 1101 GMT, the euro was slightly lower against the dollar
<EUR=> at $1.2575 after climbing to around $1.2590.
A $1.2600 expiry rolls off at the 1400 GMT cut, which may
serve to keep price action contained, traders said. A break
above the figure would find offers at $1.2640, coming from range
of players who bought in this morning's dip.
The shared currency fell around 40 ticks to the day's low of
$1.2523 <EUR=> when Moody's Investors Service cut Portugal's
debt rating by two notches to A1 with a stable outlook, saying
the government's financial strength was likely to weaken over
the near term. []
The euro also dipped on a weaker than expected reading in
June's economic sentiment poll from German think tank ZEW.
[]
A major U.S. bank was seen protecting a short-term option
barrier at $1.2500. Asian buyers were also reported in the
$1.2500 region, while real-money accounts were layering bids
from $1.2490.
Key resistance for the euro was seen around $1.2687, the
trendline from the December high.
"While capped by $1.2687, our stance will be negative,"
Commerzbank technical analysts said in a note to clients.
A robust response to a Spanish debt auction took the euro to
two-month highs of $1.2723 last Friday.
That coincided with worries the United States was heading
towards a double-dip recession, sending the greenback to its
lowest in nearly two months against a basket of currencies.
Those concerns have taken a back seat, but traders said real
money investors and margin traders were still cautious, given
lingering worries about a global slowdown.
DOLLAR INDEX
The dollar index was flat on the day at 84.207 <.DXY> while
the U.S. currency was 0.2 percent lower against the yen at 88.40
yen <JPY=>.
"Dollar/yen continues to be suppressed by the options market
and 87.80 to 89.10 has us contained for now," said a spot trader
at a U.S. bank in London.
The yen struggled for most of the previous session, after
Japan's ruling Democratic Party suffered a stinging defeat in a
weekend parliamentary election, but the currency recouped its
losses during North American trade.
Higher-yielding currencies such as the Australian <AUD=D4>
and New Zealand dollars <NZD=D4> initially benefited after Alcoa
<AA.N> posted a higher-than-expected profit for the second
quarter on Monday. []
But those currencies later gave back gains as Shanghai
shares <> closed down 1.6 percent after the government said
it would continue to rein in speculation in the country's
red-hot property sector. []
Others reporting earnings this week include Intel Corp
<INTC.O>, JPMorgan Chase <JPM.N> and General Electric <GE.N>.
(Additional reporting by Naomi Tajitsu, editing by Nigel
Stephenson, Ruth Pitchford, John Stonestreet)
