LONDON (AFX) - The euro was holding up well against the U.S. dollar in early London trade, underpinned by aggressive eur/yen buying, dealers said.
A flurry of euro buying around 111.80 yen helped to re-ignite the positive trend in eur/usd, opening the horizon for 114.00 to 116.00 levels, they added.
"The fact that investors are getting very downbeat on Japan is expressed by yen-selling and euro-buying," Paul Meggyesi at Deutsche Bank said.
Further, concerns that EU and Asian finance ministers will press the case for the euro as a reserve currency at this weekends ASEM meeting underpinned the positive tone in eur/yen, some dealers added. "I expect some fairly euro/yen positive comments out of the meeting this weekend," Meggyesi said, noting that the immediate impact however will be limited.
However, Ian Gunner at ABN Amro argued: "This meeting is not significant. Euro buying by Asian central banks is probably happening anyway, because the euro is going up." He concluded: "It reflects more what is happening, rather than determining it."
The euro's strong resistance of 0.96 usd remains intact, while this afternoon's release of U.S. December retail sales could tip the balance in favour of the euro, dealers suggested. "If we get a very weak retail sales number, the euro might brake through 0.96 usd," the Gunner noted.
"However, it depends largely on the U.S. appetite to take eur/usd higher, because with the U.S. holiday on Monday some accounts may not be too massively involved," he added.
U.S. retail sales are expected to have dropped by 0.3 pct month-on-month in December.