* Euro hits 14-month lows, rebounds later on short covering
* Eyes on ECB, which may seek to assure mkts
* Kiwi jumps after RBNZ's comments, jobs numbers
By Satomi Noguchi
TOKYO, May 6 (Reuters) - The euro edged up against the dollar
on short-covering on Thursday, after sliding to a fresh 14-month
low earlier, and as investors shifted focus to a European Central
Bank meeting later in the day.
The euro's rebound, however, remained shallow as more players
want to sell the single currency on tops after it slid through
key support levels as concerns about the sovereign debt crisis in
the euro zone mounted, traders said.
The yen held its broad strength as regional shares fell,
prompting investors to keep buying the currency as a safe haven,
which had started the previous day following comments from
European leaders that the problems facing Greece could spread to
other countries. []
The euro has not been able to make a decent recovery since
its break below the $1.30 mark earlier this week, suggesting the
market is far from done with euro selling, traders said.
"Today's ECB policy meeting could trigger a rebound in the
euro, given the steep drop in the currency of late. But as people
know there will be no quick fix for Greece, euro selling is
unlikely to end soon," said Shuichi Kanehira, head of forex spot
trading at Mizuho Corporate Bank.
The euro <EUR=> rose 0.1 percent from late New York trade to
$1.2824 after falling as low as $1.2789 on trading platform EBS
as options barriers were knocked out at $1.2800 in early Asian
trade.
The euro has now broken key support levels and the next level
is seen around $1.2550 with many in the market already eyeing its
2008 low around $1.2330.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For euro/dollar graphic http://link.reuters.com/vax72k
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The single currency lost more than 1 percent on Wednesday and
has shed more than 3.5 percent so far this week.
Against the yen, the euro was up 0.1 percent at 120.38 yen
<EURJPY=R> after having lost over 2 percent on Wednesday as
investors fled to the relative safety of the lower-yielding yen.
"The focus stays on the euro as the contagion trade
persists," JP Morgan said in a morning note.
"Today's ECB meeting has grown immensely in importance as the
redeployment of some form of credit crisis tools seems
increasingly possible."
The ECB holds its monthly meeting later on Thursday and,
while it is expected to keep rates unchanged at 1 percent, it
should seek to assure markets that it can prevent the Greek debt
crisis spreading. []
The ECB meet comes as the cost of insuring Greek, Spanish and
Portuguese debt against default has been rising, while Moody's
put Portugal's credit rating on review for a possible downgrade
on Wednesday. []
Sterling rebounded against the dollar <GBP=D4> from five-week
lows ahead of Britain's parliamentary election, with two polls
pointing to a hung parliament. []
The pound stood at $1.5114 <GBP=D4>, up 0.1 percent and off
Wednesday's low of $1.5068, the lowest since late March.
FIRM DOLLAR
The euro's weakness was helping the dollar index hold
impressive gains this week. The index <=USD> <.DXY> was little
changed at 84.12, staying within reach of a one-year high of
84.31 hit earlier in the session.
The dollar was up marginally on the yen <JPY=> at 93.86 yen,
from 93.65 yen late on Wednesday when it lost over 1 percent.
However, the dollar's rise could be capped by selling from
Japanese exporters as Tokyo resumed trade on Thursday after the
Golden Week holidays.
On Wednesday, the greenback got a boost from data showing
U.S. private sector employers added 32,000 jobs last month,
bolstering the view that U.S. interest rates will likely rise
from record lows well before action on rates in the euro zone.
Meanwhile, the New Zealand dollar jumped over 1 percent at
one point after the Reserve Bank of New Zealand said it would
begin raising interest rates soon and jobs data proved stronger
than anyone expected. [][]
That came in contrast to surprisingly soft Australian retail
sales data, which could give policy makers extra reason to hold
off on further rate increases, at least for now.
[][]
The kiwi was up 0.7 percent at $0.7263 <NZD=D4>. The Aussie
fell 0.2 percent to $0.9043 <AUD=D4>, dipping below earlier lows
hit after the data.
(Additional Reporting by Anirban Nag in Sydney and Rika Otsuka
in Tokyo; Editing by Joseph Radford)
