The euro ticked up towards a two-month peak above $1.30 today, although traders were cautious about bidding it up too much as they await clarity on Deutsche Bank's exposure to euro zone sovereign debt.
Deutsche posted second-quarter pretax profit in line with expectations but it has not revealed its exposure to European sovereign debt following tests to see how well banks in the region would stand up to financial shocks.
Some traders said that if the bank gives details and there are no shocks, that could help build more confidence in euro zone banks and trigger buying in the euro.
In that case, the single currency's next target would be last week's two-month high of $1.3029 and then $1.3125, a 38.2 per cent retracement of its December-June fall, technical analysts said.
"Despite all the negative talk about the stress test results, German interest rates are rising and the euro firmed, which seems to suggest lingering euro short-covering needs," said Osamu Takashima, chief FX strategist at Citibank in Tokyo.
The euro rallied yesterdad on relief the tests were over, although concerns they were not rigorous enough mean investors are still hesitant to make big bets on it, while some traders say euro zone debt redemptions this week could also constrain it.
Citi estimates there are some €45 billion worth of maturing bonds and coupon payments this week.
The euro rose 0.1 per cent to $1.3009. It climbed as high as $1.3019 earlier. Any fall was seen likely to be limited while it remained above support at $1.2870 - its 100-day moving average - and last week's low around $1.2730.
The euro gained 0.2 per cent to 113.11 yen. It has met stiff resistance at 113.30-50 in the past two weeks, partly on selling by Japanese exporters.
The Aussie was steady on the day at $0.9021, after rising 0.9 per cent yesterdad as investor risk appetite revived after the stress test results.
Chartwise it could be set to rise against the yen. On the daily Ichimoku chart for Aussie/yen, the tenkan sen has risen above the kijun sen line, in a bullish signal.
The top of the Ichimoku cloud now lies roughly around 80 yen, and a rise above that level would be another bullish sign.
"I think investors will tiptoe back into high-yielders as worries about Europe will gradually subside," said a trader at a Japanese brokerage house.
The US dollar gained 0.1 per cent against the yen to 86.97 yen, though it was capped by offers around 87 yen from Japanese exporters.
Reuters