By Satomi Noguchi
TOKYO (Reuters) – The euro steadied on Wednesday to hold sharp gains made the previous day against the dollar as investors cut short positions on views that the fall in the euro over Greece’s debt problems had run its course.

The euro had shed as much as 10 percent since late 2009 at one point as worries over whether Greece could service its debt mounted, and currency speculators later reversed record short euro positions they had built into last week.

The euro’s rebound came in tandem with a sharp pull back in the dollar’s upward momentum versus other major currencies, including the Australian dollar, with charts suggesting more room for the greenback to slip, market players said.

Investors sold the Aussie to take profits from the currency’s climb the day before, but the Hong Kong stock market .HSI rose despite China’s move before the Lunar New Year holidays to raise bank reserves for the second time this year, feeding a return of risk appetite among investors and providing support to the Aussie.

“I see this euro’s rebound as a temporary break from its longer-term downward trend. But its corrective move up could continue until early next week when Chinese markets resume full-fledged activity,” said Hideki Amikura, deputy general manager of the forex section at Nomura Trust bank.

The Hong Kong market reopend on Wednesday, while Shanghai’s market resumes trading on Monday.

“The euro could recover to as much as above $1.3900 in this corrective session,” Amikura added.

The euro was changing hands at $1.3765 EUR=, steady from late New York trade on Tuesday when it posted its sharpest daily rise since July and jumped as high as $1.3780 on trading platform EBS, the highest in about a week.

Traders saw resistance for the euro around $1.3850, a tad above last week’s high at $1.3840. But its rise above those levels on the other hand could accelerate the euro’s rebound, traders said.

The dollar index, a gauge for the greenback’s performance against another six major currencies, was little changed at 79.688 .DXY, a touch above Tuesday’s low of 79.593.

Analysts said technical signs pointed to the dollar index seeing a deeper pullback from its run up to a seven-month high of 80.748 on Friday, once it breaks below mid-79.

But investors were still cautious amid uncertainty over whether Greece’s debt problem will be solved quickly.

Market players said the euro remained highly sensitive to any more negative news on Greece.

European finance ministers said on Tuesday that Greece should present a report by March 16 setting out a timetable for the implementation of budget target measures for 2010, and another by May 15 setting out policy measures needed to comply with the finance ministers’ decision. Quarterly reports will be required from then on. [ID:nLDE61F0XT] [nEUROPEAND]

The Australian dollar slipped 0.1 percent to $0.9008 AUD=D4 with investors booking profits from its climb as high as $0.9028 the previous day, its highest since late January.

The Aussie remained supported by comments by the Reserve Bank of Australia (RBA) on Tuesday that more rises in interest rates in Australia were likely this year as well as gains in commodities.

The euro was up 0.2 percent against the yen at 124.40 yen EURJPY=R after climbing over 1.5 percent the previous day to as high as 124.48 yen on EBS, its highest in about two weeks.

The dollar rose to 90.36 yen JPY=, up 0.2 percent from late U.S. trade on Tuesday when it climbed as far as 90.52 on EBS, its highest since Feb. 4. (Additional reporting by Kaori Kaneko; Editing by Joseph Radford)

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