FOREX-Euro falters, awaits details of Greece rescue

                                
 * Euro trims some of previous day's gains
                                
 * Hopes for EU bailout for Greece lift risk sentiment
                                
 * Details and impact on Spain and Portugal in focus
                                
 * Bernanke testimony at 1500 GMT awaited
                                
 By Satomi Noguchi
                                
 TOKYO, Feb 10 (Reuters) - The euro fell on Wednesday,
trimming some of the previous day's gains, with investors
awaiting details of a rescue package for Greece, keen to see how
it could impact the euro zone economy.
                                
 The euro was handed a reprieve on Tuesday after a senior
German ruling coalition source told Reuters that euro zone
governments had decided in principle to help Greece, prompting
investors to unwind short positions in the single currency.
[ID:nSGE61801C]
                                
 Various options were under consideration and no final
decision had been taken but the most likely possibility was to
offer "bilateral help", the source said.
                                
 Some traders said that while there was some short-covering in
the euro the previous day, heavy moves in the single currency
suggest the market is not fully convinced Greece will be bailed
out.
                                
 "If the market was really no longer concerned about Greece,
then the euro would have gained much more than that," said
Nobuhiko Akai, a senior manager in the forex trading group at
Bank of Tokyo-Mitsubishi UFJ.
                                
 Concerns about Greece's public finances and potential
contagion effects have hit the euro and soured risk appetite in
recent weeks. European Union leaders will hold a special summit
on the European economy on Thursday, and speculation is swirling
that a package will be hammered out soon for Greece.
                                
 Some market players questioned the wisdom of buying up the
euro at this stage, as aid for Greece could lead to similar
measures for the other struggling euro zone economies like Spain
and Portugal.
                                
 "This still means a burden to the region and possibly puts a
constraint on the ECB's monetary policy and pace of withdrawal of
liquidity injection," said a trader at a European bank in Hong
Kong. "Fundamentally, Europe will likely remain a lagged,
underperforming the U.S."
                                
 The euro <EUR=> fell 0.4 percent from late U.S. trading on
Tuesday to $1.3746, after jumping about 1 percent on Tuesday, its
best daily performance in more than two months. Near-term
resistance for the euro is seen around $1.3850, its Feb. 1 low.
                                
 Against the yen the euro edged down 0.5 percent to 123.13 yen
<EURJPY=R>, giving back some of the gains it made on Tuesday,
when it climbed about 1.5 percent on trading platform EBS.
                                
 EYES ON EU, BERNANKE
                                
 Data on speculators' positions in IMM futures suggested the
euro was due for some short-covering. IMM speculators increased
their net short positions in the euro to 43,741 contracts in the
week ending Feb. 2, their bets against the euro having more than
doubled in three weeks. [IMM/FX]
                                
 Both the U.S. dollar and yen <JPY=> have been the main
gainers since late last month on increasing worries that the pace
of global growth will slow and that problems plaguing Greece may
spread to Spain and Portugal.
                                
 Traders said the euro's recent bounce is leading to some
unwinding of these positions pushing down the dollar <.DXY> and
yen.
                                
 The dollar index, which measures the dollar's value against a
basket of currencies, rose 0.2 percent on the day to 79.980
<.DXY>, but was still was down from a seven-month high of 80.683
hit last week.
                                
 "As Europe moves closer to ring-fencing Greece, bear market
hedges make less sense," strategists from JP Morgan said in a
note.
                                
 "If European governments deliver on reports of bilateral
assistance to Greece, and if Europe imposes conditionality akin
to an International Monetary Fund programme, then the euro/dollar
will have seen a near-term bottom."
                                
 The dollar dipped 0.1 percent against the yen <JPY=> to 89.61
yen.
                                
 The market is also keenly watching Fed Chairman Ben Bernanke
who is expected on Wednesday to outline the Fed's strategy for
tightening. The prepared testimony will be released at 1500 GMT,
even though the congressional hearing has been postponed.
[ID:nFEDAHEAD].
                                
 Meanwhile, the Australian dollar slipped 0.6 percent to
$0.8744 <AUD=D4>, after jumping more than 1.5 percent on Tuesday.
 (Additional reporting by Anirban Nag in Sydney and Charlotte
Cooper and Masayuki Kitano in Tokyo;)