* Euro slips on profit-taking after surge
* Some see more short-covering if resistance broken
* Soft U.S. jobless claims data weighs on dollar
* Yen hits 1-week high vs greenback
By Chikako Mogi and Hideyuki Sano
TOKYO, Jan 14 (Reuters) - The euro succumbed to light
profit-taking on Friday, a day after staging its biggest surge
in six months on solid debt sales by Spain and tough talk on
inflation by the chief of the European Central Bank.
Speculation that European policy-makers may top up their war
chest against attacks on euro zone sovereign debt is adding fuel
to short-covering even though many market players suspect
worries about the solvency of peripheral euro zone members will
persist.
"The euro's latest rise is nothing more than short-covering
from overselling late last year on an excessively bearish view
on the euro zone. Given that the fiscal problems in the region
are unresolved, investors will be cautious about chasing the
currency higher," said Tsutomu Soma, manager of foreign
securities at Okasan Securities.
The euro slipped 0.2 percent in Asia to $1.3330 <EUR=>,
after climbing as high as $1.3383 the previous day.
The single currency had risen more than 3 percent from a
four-month low of $1.2960 marked at the start of the week,
making it ripe for profit-taking.
Its 55-day moving average, which was $1.3389 on Thursday and
$1.3378 on Friday, is serving as immediate resistance, though a
break of that level could spark another wave of short-covering.
If that happens, levels just above $1.34 could be the next
hurdle, where it has a 38.2 percent retracement of the
November-January slide as well as an Ichimoku cloud base.
The euro also dropped 0.5 percent against the yen to 110.11
yen <EURJPY=R> as Japanese exporters took advantage of its rise
to a three-week high of 110.67 yen on Thursday to sell the
currency.
But the common currency did less badly on other crosses.
It stood at 1.2855 Swiss franc <EURCHF=R>, not far from
Thursday's one-month high of 1.2885 as the franc comes under
pressure ahead of a meeting later in the day between the Swiss
government and representatives from Swiss business associations,
banks and trade unions to discuss the implications of the strong
franc.
The euro also stayed close to a one-month high against the
Australian dollar <EURAUD=R>.
SPAIN DEMAND
Strong demand in Spain's bond auction on Thursday, a day
after a solid Portuguese debt sale, helped ease pressure on
peripheral bond markets for now. []
ECB President Jean-Claude Trichet also said prices needed to
be monitored very closely after euro zone inflation jumped last
month, hinting the bank could raise interest rates to contain
inflation even while the bloc is gripped by a debt crisis.
[]
His comments surprised market players, who had expected the
bank to take a more dovish line at a time when some euro zone
countries are facing strains in fund-raising.
Analysts said the euro may see some support on speculation
that European policy-makers could be ready to increase the size
and scope of a rescue fund.
German Finance Minister Wolfgang Schaeuble said on Thursday
that it was too early to talk about the size of a permanent
European bailout fund and that debate about boosting the current
fund was not realistic.
However, he did say he was open to discussion about helping
the existing fund make full use of its potential resources.
[]
Although Germany has repeatedly rejected in public calls to
extend the 440 billion euro ($570.3 billion) European Financial
Stability Facility, Berlin has been discussing the possibility
with its partners behind the scenes. []
Some market players also said weak U.S. jobless claims data
had hurt the dollar, indirectly helping the euro. Initial
jobless claims rose to a 10-week high and sent U.S. bond yields
lower. []
"When you look at the market yesterday, the dollar was
broadly weak after the initial jobless claims data. So you could
argue that the market may be starting to focus on the U.S.
economy, at least temporarily," said Junya Tanase, a strategist
at J.P. Morgan Chase Bank.
Lower U.S. bond yields helped bring down the dollar to a
one-week low of 82.47 yen <JPY=>, not far from the bottom of the
ichimoku cloud, which will sit at 82.31 yen until the middle of
next week.
A break below the cloud is considered a major bear signal.
As the greenback fell broadly after the data, the index of
the dollar against a basket of currencies <.DXY> <=USD> stood at
79.20, not far from the bottom of its trading band since
December at 78.775.
DATA RAFT
While many market players expect the dollar to be supported
around December lows, a minority think it may come under
pressure if a raft of U.S. data due later in the day, including
retail sales and consumer prices, fall short of market
expectations.
Daisuke Uno, chief strategist at Sumitomo Mitsui Banking
Corp, said the euro could test its December peak of $1.35 and
that the dollar could trouble a low of 80.93 yen hit at the
start of this month.
"It would be futile to attempt to keep selling the euro on
the debt crisis when Europe already has a safety net. I expect
broad selling in the dollar," Uno said.
(Additional contribution from Reuters FX analysts Krishna
Kumar in Sydney and Rick Lloyd in Singapore; Editing by Joseph
Radford)
