* Euro rebounds along with pullback in dollar upward momentum
* HK shares rise despite China move before holidays
* AUD retreats, but returning risk appetite gives support
* Caution over Greece debt problem caps euro gains
By Satomi Noguchi
TOKYO, Feb 17 (Reuters) - The euro steadied on Wednesday to
hold sharp gains made the previous day against the dollar, as
investors cut short positions on views that its fall over
Greece's debt problems had run its course.
The euro at one point had shed as much as 10 percent since
its 2009 high in November as worries over whether Greece could
service its debt mounted. But currency speculators later reversed
record short euro positions they had built into last week.
It is still down about 9 percent since that high. But the
small rebound has come in tandem with a sharp pullback in the
dollar's upward momentum versus other major currencies, including
the Australian dollar, with charts suggesting more room for the
greenback to slip, market players said.
Investors sold the Aussie to take profits from the currency's
climb the day before. But a rise in Hong Kong shares, on their
first trading day since China raised bank reserve requirements
last week, fed a return of risk appetite among investors and
supported the Aussie.
The low-yielding yen, which also retreated on Tuesday, was
soft against the likes of the Australian dollar and the euro.
"I see this euro rebound as a temporary break from its
longer-term downward trend. But its corrective move up could
continue until early next week when Chinese markets resume
full-fledged activity," said Hideki Amikura, deputy general
manager of the forex section at Nomura Trust bank.
The Hong Kong market reopened on Wednesday after a two-day
Lunar New Year holiday. Shanghai's market resumes on Monday.
"The euro could recover to as much as above $1.3900 in this
corrective session," Amikura added.
The euro was steady at $1.3776 <EUR=> after rising as far as
$1.3782 on trading platform EBS, its highest in a week.
Traders saw resistance for the euro around $1.3850, a tad
above last week's high at $1.3840. But if it could get through
that level, its rebound could accelerate, traders said.
The dollar index, a gauge of the greenback's performance
against another six major currencies, was little changed at
79.660 <.DXY>, a touch above Tuesday's one-week low of 79.593.
Analysts said technical signs pointed to the dollar index
seeing a deeper pullback from its run up to a seven-month high of
80.748 on Friday, once it breaks below mid-79.
But investors were still cautious as uncertainty remains
longer term about Greece's debt problems and market players said
the euro remained highly sensitive to negative news on Greece.
European finance ministers said on Tuesday that Greece should
present a report by March 16 setting out a timetable for the
implementation of budget target measures for 2010, and another by
May 15 setting out policy measures needed to comply with the
finance ministers' decision. Quarterly reports will be required
from then on. [] []
The Australian dollar slipped 0.1 percent to $0.9012 <AUD=D4>
with investors booking profits from its climb as far as $0.9028
the previous day, its highest since late January.
The Aussie remained supported by comments by the Reserve Bank
of Australia on Tuesday that more rises in interest rates in
Australia were likely this year as well as gains in commodities.
The euro was up 0.2 percent against the yen at 124.39 yen
<EURJPY=R> after climbing as high as 124.50 yen on EBS, its
highest in about two weeks.
The dollar rose to 90.36 yen <JPY=>, up 0.2 percent from late
U.S. trade on Tuesday when it climbed as far as 90.52 on EBS, its
highest since Feb. 4.
FOMC MINUTES
The U.S. Federal Reserve will release the minutes from its
meeting of Jan. 26-27 later on Wednesday and investors were
looking for hints of an exit strategy from loose monetary policy.
At the meeting last month, Fed policy makers maintained a
pledge to hold interest rates near zero. But a dissenting note
from Kansas City Federal Reserve Bank President Thomas Hoenig has
sparked discussion that monetary tightening could be approaching.
[]
"The market focus will be how far a discussion about an exit
strategy has grown among the Fed policy makers," said Jun Kato,
senior chief analyst at Shinkin Central Bank Research Institute.
"Any market impact from the minutes is likely to be limited
as it has already priced in that the U.S. is heading in that
direction but a rate hike is still a long way off because hiking
early would stall the economic recovery," he said.
(Additional reporting by Kaori Kaneko; Editing by Edwina Gibbs)
