* Euro dips after rebounding off 4-yr low on short-covering
* US Senate votes "no" on IMF aid to troubled nations
* Widening in Portugal, Greece CDS underscores euro's woes
* Some scope for near-term bounce but downtrend seen intact
By Masayuki Kitano
TOKYO, May 18 (Reuters) - The euro dipped on Tuesday, its
trend seen weak despite a rebound from a four-year trough, with
investor jitters persisting over the euro zone's fiscal woes and
concerns that austerity steps could hurt the region's growth.
The single currency edged lower, giving back some of the
gains it made the previous day on short-covering.
News that the Senate had voted for the U.S. government to
oppose International Monetary Fund bailout packages to countries
unlikely to repay them weighed on the euro. []
That caused market players to fret about the potential impact
on any future IMF measures to help ease the euro zone's debt
crisis and prompted some euro selling, although there was
uncertainty about how much impact the Senate decision would have.
"Even small factors can prompt selling of the euro on
rallies at the moment. After its failure to clearly break above
$1.2400 yesterday and today, the market may have taken the news
as a factor," said Daisuke Karakama, a market economist at Mizuho
Corporate Bank.
"But if the market had taken this to mean the United States
will really exercise veto power, the euro could have fallen
further," he said.
The United States is the IMF's largest contributor and has
veto power to block decisions, but has never used it.
The Senate vote may be just a political gesture, said Koji
Fukaya, a senior currency strategist at Deutsche Securities.
"There's been a bunch of things that have come up that seem
to be aimed at the elections," Fukaya said, referring to
November's U.S. midterm congressional elections.
The euro slipped 0.5 percent to $1.2333 <EUR=> but remained
above its four-year trough of $1.2234 struck on Monday on trading
platform EBS.
The euro fell 0.7 percent against the yen to 114.04 yen
<EURJPY=R>, heading back towards an eight-year low of 110.49 yen
struck earlier this month on EBS.
Traders cited talk of active selling of sterling by a
European bank. Such flows helped push sterling down 0.5 percent
against the dollar to $1.4416 <GBP=D4>, also helping drag the
euro lower against the dollar, they said.
SHORT-COVERING BOUNCE?
Despite the euro's retreat on Tuesday, some traders said the
currency may be poised to rise further over the course of the
week, given the potential for further short-covering.
U.S. Commodity Futures Trading Commission data released last
week showed currency speculators boosted net short positions in
the euro to a record high in the week ended May 11. []
One upside target in the near term may be $1.2445, a 61.8
percent retracement of its fall from Friday's high near $1.2575
to Monday's four-year low of $1.2234.
On the downside, the next key support for the euro lies near
$1.2135, a 50 percent retracement of a rally from all-time lows
near 82 U.S. cents to record highs just above $1.60.
Traders said that while the euro may consolidate and start to
form a near-term bottom, it was premature to think its
longer-term downtrend was drawing to a close, and its moves were
likely to stay choppy.
"It's still hard to see how the problems in Europe stemming
from Greece will come to an end. It's hard to say what would
convince everyone that it's over," said Minoru Shioiri, chief
manager of FX trading at Mitsubishi UFJ Morgan Stanley
Securities.
"That is what's most troubling about this issue," Shioiri
said, noting that credit default swap costs for Portugal and
Greece jumped on Monday. []
The Australian dollar fell 0.6 percent to $0.8716.
Minutes from the Reserve Bank of Australia's (RBA) policy
meeting showed it thought its rate rise on May 4 left monetary
policy well-placed for now. []
(Additional reporting by Kaori Kaneko in Tokyo and Anirban Nag
in Sydney; Editing by Michael Watson)
