* Euro holds near 2-mth highs on easing debt concerns * Resistance seen at $1.2767 and then at $1.2780 * Aussie holds previous day's gains, U.S. earnings help
By Masayuki Kitano
TOKYO, July 14 (Reuters) - The euro held steady near a two-month high against the dollar on Wednesday, with high-yielding currencies such as the Australian dollar supported by a seemingly significant improvement in risk appetite.
The dollar could come under more pressure, especially against higher-yielding currencies, in reaction to robust U.S. corporate earnings.
Intel Corp (INTC.O) reported results above expectations and gave an upbeat sales outlook, pushing S&P futures higher SPv1 .SPX. [ID:nN12197658]
Traders said funds were increasingly moving out of cash and low-yielding U.S. Treasuries to buy euro and growth-related currencies. Helping drive sentiment was a strong start to the U.S. corporate earnings season and easing concerns about euro zone's sovereign debt and the financial sector.
The euro was little changed from late U.S. trading on Tuesday at $1.2710. It hit a two-month peak of $1.2739 on Tuesday, brushing aside a Moody's downgrade of Portugal's sovereign rating by two notches.
Instead, investors chose to pay more heed to the strong response to a six-month treasury bill tender by Greece. The debt-laden country sold 1.625 billion euros ($2.03 billion) of T-bills at a better rate than it pays to borrow under a European Union/International Monetary rescue fund. For more see [ID:nATH005574].
What we are seeing is that cash is being put back to work with all the negative news surrounding the euro zone receding, said Greg Gibbs, currency strategist at RBS, Sydney.
Some of the risk premium that was being attached to the euro zone is being taken off. The downgrade of Portugal was very much expected and I think we could see the euro rise a bit more from here.
Chartwise, resistance is seen at $1.2767, the target of an A-B-C wave sequence starting from the euro's four-year low of $1.1876, with the C-wave starting at $1.2152.
The next target comes in at $1.2780, which is a 50 percent retracement of its fall from mid-April to the June low.
The euro rose 0.3 percent against the yen to 113.18 yen, hovering near a three-week high of 113.29 yen EURJPY=R hit earlier.
The yen was broadly under pressure and retreated against the dollar, which rose 0.3 percent to 88.96 yen, with talk of stop-loss bids above 89.25 yen.
The yen, considered to be a safe-haven investment, is usually sold off when risk appetite improves.
The dollar index .DXY was almost unchanged at 83.619, having broken trendline support. New support is seen around 83.15, the 38.2 percent retracement of the the index's November to June rally.
Other major U.S. corporates to report quarterly earnings this week include JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N). [ID:nN07172590]
Some traders expressed doubts about whether the improvement in risk appetite would last, saying it could worsen again if U.S. banks' quarterly earnings come in weak.
Akira Hoshino, chief manager for the Bank of Tokyo-Mitsubishi UFJ's foreign exchange trading department, reckons U.S. economic indicators such as the Philadelphia Fed's business activity index due later in the week could be key.
Markets have pulled back up after having tried to factor in pretty far in advance an economic slowdown and deflation, Hoshino said, adding that such concerns could come to the fore again.
Sterling rose 0.3 percent to $1.5218. Earlier in the session, it scaled a two-month peak of $1.5245 after data on Tuesday showed quarterly consumer price inflation remained above the Bank of England's 2 percent target rate. [ID:nLDE66C10Y]
The Australian dollar hit a three-week high of $0.8851, though it later slipped a tad to around $0.8827 on light profit-taking, with resistance at the June high of $0.8860, and also at levels near $0.8880 to $0.8885.
The 100-day moving average and 61.8 percent retracement of its April 12 to May 25 slide are near such levels. (Additional reporting by Anirban Nag and Reuters FX analyst Krishna Kumar in Sydney, Reuters FX analyst Rick Lloyd in Singapore, Hideyuki Sano in Tokyo; Editing by Joseph Radford)