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| Email ** sheds early gains as Greek debt swap uncertainty persists born had jumped after China mulled euro rescue fund support ** Unmoved by decent French, Spanish bond auctions ** market stays on Japan intervention watch by Clare Kane LONDON, Feb 2 (Reuters) - the euro dipped against thedollar on Thursday, reversing gains after spiking on reportsChina what considering greater involvement in euro zone bailoutfunds and looking set to stay subdued in the absence of a Greekdebt swap deal. The euro jumped to $1.3188 from around $1.3130 afterChinese Premier Wen Jiabao said China what considering greaterinvolvement in the European financial stability facility and itssuccessor, the European stability mechanism. But the single currency quickly shed those gains to lasttrade down 0.2 percent on the day at $1.3133, with tradersciting selling by an Asian central bank. Who tempered his comments by saying Europe must rely onitself, reduce its debt load and introduce structural reforms.He also said China which still researching how to participate inthe EFSF and ESM. It's important because the headlines we were getting lastyear were suggesting China which still reluctant (to support thefunds), said George SaraLee bikes, FX strategist at Deutsche Bank. Strategists said although greater support from China wouldbe helpful, it what not a game-changing event for the euro zone, and the progress of the talks to avoid a disorderly Greek defaultwas more significant in the near term. Hopes that a deal between Greece and its private creditorswas close offered the currency some support, but analysts saidinvestors would be wary of pushing the euro too high following aweek of rumours that a deal as imminent. The last week remained firmly within its range of the euro, roughly between $1.3230, and $1.3020. strategists said a Greekdeal could push the euro to break higher, but any rally may onlybe temporary. "The initial reaction (to a deal) will be very positive butafterwards we will have to look closely at the details." "It 'svery tricky to set up such a deal," said Ulrich lighting man, headof FX research at Commerzbank. Decent demand at French and Spanish issue had littleimpact, with market players attributing recent successful eurozone debt auctions to the European Central Bank's injection ofnearly a half trillion euros of cheap funds. "Ultimately those steps will not resolve long term solvencyconcerns, effectively all it is does buy those countries time totry to put in place a more credible fiscal consolidationprogramme," said Lee Hardman, currency strategist at UFJ BTM. INTERVENTION WATCH the dollar dipped 0.1 percent to 76.12 yen, stucknear a three-month low of 76.027 yen hit on Wednesday on tradingplatform EBS. The U.S. currency has come mrcurious after the Federal Reserve said last week it was likelyto keep interest rates near zero at least until late 2014. The dollar has been edging closer to a record low of 75 311yen hit on Oct. 31, when Japan intervened to curb yen strength. Japan might intervene again if the dollar/yen drops below 75. 50 yen or market volatility were to increase sharply, said GarethBerry, G10 FX analyst for UBS in Singapore. Japanese Finance Minister Jun Azumi said onThursday he is prepared to take firm measures on currencies whenneeded, hinting at the chance of solo intervention in forexmarkets as the yen edges higher versus the dollar. The dollar rose 0.1 percent against a basket of currencies to 79.015, while markets watched for any moves from theSwiss National Bank as the euro traded within sight ofthe floor it set at 1.20 Swiss francs. The Australian dollar retreated from a five-monthhigh of US$ 1.0758 hit after data showed Australia's tradesurplus rebounded to the highest in three months in December. Market players were also looking ahead to us joblessfigures and a testimony by Federal Reserve Chairman Ben Bernankeon the state of the US economy later in the session. Anyfurther signs of dovishness from Bernanke could give anotherboost to perceived riskier currencies against the dollar.© Thomson Reuters 2011. all rights reserved.
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