* Euro holds gains made on short-covering
* Aussie firms; sterling keeps gains vs euro after TV debate
* BOJ says to seek ways to support economy
By Aiko Hayashi
TOKYO, April 30 (Reuters) - The euro held on to gains on
Friday, helped by hopes of a quick Greek rescue package that
spurred investors to cover short positions, while the Australian
dollar firmed on growing talk of an interest rate hike next week.
Sterling held close to this year's highs against the euro
<EURGBP=D4> following the third and final TV debate between the
three candidates for British prime minister at next week's
election, after snap polls judged the opposition Conservative
leader to be the debate winner. []
The euro lost steam after rising to $1.3266 as stops were
taken out in thin conditions, leading to a short squeeze, and it
retreated to $1.3260 <EUR=>. It is on track to lose 2 percent
this month, although it is above this week's one-year low of
$1.3114.
Investors are heavily short the euro, so any hopes of a quick
European Union/International Monetary Fund aid package for Greece
could provide some relief, but sentiment remains bearish.
Traders said the euro is on track to test $1.31, a 76.4
percent retracement of its move up from a low near $1.2460 in
March 2009 to a high of $1.5145 in November last year, and then
support around $1.30.
"The market is welcoming for now the prospect that Greece
would be able to secure funding in time for the bond redemption
due on May 19," said Tsutomu Soma, a senior manager at Okasan
Securities.
"Still, what could happen after that remains highly
uncertain."
Greece readied severe austerity measures to secure a
multibillion euro aid package and avoid debt default, providing
relief to markets but drawing threats from unions of a mighty
battle to come. []
European Union Economic and Monetary Affairs Commissioner
Olli Rehn said the EU should complete talks "within days".
Investors were comforted by signs the package could be worth
as much as 100 to 120 billion euros ($133-158.5 billion) over
three years -- much more than an earlier reported 45 billion
euros.
"The situation, though, remains highly fluid with FX markets
trading on headlines as they hit the wires," JP Morgan said in a
note. "We remain cautious in our view towards the euro precisely
for this reason but remain more confident in being short where
there is a strong macro fundamental reason to do so."
Sterling <GBP=D4>, one of the star performers the previous
day, stood at $1.5356 from $1.5322 late on Thursday when it
gained 0.8 percent.
Traders said it was helped in part by data that showed rising
British house prices and on talk of buying by sovereign funds.
With less than a week to go before Britain's general
election, concerns remain that it be the nation's first
inconclusive election since 1974, with no one party holding an
outright majority. Sterling was flat against the euro at 86.31
pence <EURGBP=D4> after pushing the euro down 0.6 percent on
Thursday.
It touched 86.03 pence this week, as good as matching a
January peak, which was its highest since August.
The Bank of Japan left rates unchanged at 0.10 percent but
said it expected core consumer prices to rise 0.1 percent in
2011/12, up from a previous forecast for a fall of 0.2 percent.
It also said it would look at ways to strengthen the
foundations of economic growth through banks and fund supply,
which market players speculated meant it might be trying to bring
down an interbank lending rate known as Tibor. []
"The BOJ may be trying to say that although the economy is
recovering gradually, its monetary policy will not be heading
toward an exit strategy in lockstep with that trend," said
Tokichi Ito, deputy general manager for Trust & Custody Services
Bank's forex team. He said on balance this looked negative for
the yen.
Dollar/yen was flat at 94.05 yen <JPY=> while euro/yen
<EURJPY=R> was steady around 124.63 yen.
Meanwhile, the Australian dollar <AUD=D4> edged above
$0.9300, up 0.3 percent on the day.
Traders said buying by some Japanese entities pushed it up,
while mounting speculation that the Reserve Bank of Australia
will raise rates next week also supported sentiment.
Traders said stop-loss buy orders were lined up above
$0.9330. The Aussie has been struggling to break higher in the
past few months, unable to get beyond a November high of $0.9407.
The Aussie edged up 0.2 percent to 87.50 yen <AUDJPY=R>. A
break above 87.77 yen would take it to its highest in about 19
months.
The New Zealand dollar held close to a three-month high of
$0.7258 <NZD=D4>.
(Additional reporting by Anirban Nag; Editing by Michael Watson)
