August 21, 2012 / 6:17 AM / 5 years ago

FOREX-Euro listless on ECB doubts, seen vulnerable

* Fresh doubts on ECB action caps euro

* Worries about Greece may resurface this week - strategist

* Aussie stays above channel support after RBA minutes

By Hideyuki Sano

TOKYO, Aug 21 (Reuters) - The euro held steady on Tuesday but appeared increasingly vulnerable to a reverse amid doubts whether policymakers could agree a viable plan of action by next month to take some of the pressure off debt-stricken euro zone countries.

“The market has been recently cherry-picking only positive factors (for the euro), but I expect a reversal in the next couple of days,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.

The euro stood little changed in Asian trade at $1.2358 , off its peak of $1.2440 hit on Aug. 6, just after European Central Bank President Mario Draghi signalled the bank would revive its bond buying scheme to lower borrowing costs of Italy and Spain.

Hopes that the ECB would start buying bonds of struggling euro zone members in September had underpinned the euro since late last month, but market players said a reality check was due.

On Monday, the European Central Bank brushed aside a report by German magazine Der Spiegel that it was considering setting yield thresholds for any moves to buy bonds, saying it was misleading to report on decisions that had not yet been taken .

Germany’s Bundesbank also stepped up its resistance on Monday to a ECB plan to buy billions of euros worth of Spanish and Italian government bonds.

It’s not clear how quickly Spain will apply for external aid -- precondition for the ECB’s buying, said Seiya Nakajima, chief economist at Itochu Corp.

“Considering the previous examples such as Greece, countries tend to drag their feet until things get really bad. Right now everyone is dreaming the midsummer night’s dream of the ECB,” Nakajima said, referring to William Shakespeare’s comedy of fairies, jesters and donkeys’ heads.

AFTER SUMMER LULL

SMBC’s Uno said the market is likely to shift its focus back to the problems euro zone policymakers face reaching agreement as they resume talks after summer holidays.

French President Francois Hollande and German Chancellor Angela Merkel will meet on Thursday, a day before Greek Prime Minister Antonis Samaras arrives in Berlin.

Samaras is expected to lobby for a two-year extension of austerity measures to soften their negative economic impact, though he is unlikely to win major concessions.

“If Greece and the EU cannot reach an agreement, that could rekindle speculation about Greece’s exit from the euro zone,” SMBC’s Uno added.

The dollar eased slightly against the yen to 79.29 yen , off a five-week high of 79.66 yen hit on Monday, with selling from Japanese exporters seen capping the currency for now.

On the other hand, the Australian dollar gained a tad after the minutes of the central bank’s latest meeting gave no hint of further easing.

That helped the Aussie stay above a key channel line support just above $1.04.

It was changing hands at $1.0479, up 0.3 percent on the day, and up further from its three-week low of $1.0411 hit last Friday.

Still, the Aussie has underperformed other risk-sensitive currencies in recent weeks, to stand 0.2 percent down so far this month, compared to a 1.5 percent gain in the Canadian dollar.

“One possible reason for the Aussie’s underperformance is worries about a slowdown in China,” said Masafumi Yamamoto, chief strategist at Barclays in Tokyo.

Shanghai shares hit 3 1/2-year low on Monday before rebounding slightly on Tuesday.

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