The euro steadied against the dollar and the Swiss franc on Thursday, helped by supportive comments from China, but analysts said the outlook for the single currency was shaky, with fresh losses expected into 2011.
Liquidity was at a premium in currency markets ahead of year-end, with traders saying flows were having a bigger impact on price than fundamentals.
A Chinese Foreign Ministry spokeswoman said China was willing to help countries in the euro zone return to economic health and would support the International Monetary Fund bailout package for the bloc.
A Portuguese newspaper report on Wednesday suggested China was ready to buy significant amounts of Portuguese debt to try to instil confidence in the country's ailing economy.
But the single currency's outlook remained shaky at best and more losses into 2011 are seen likely as the euro zone debt crisis looks set to drag on.
"We expect further weakness for the euro by the end of the first quarter of 2011, and in the near term a break of the 200-day moving average will be important," said Elsa Lignos, currency strategist at RBC Capital Markets. "As long as there are periphery concerns in the euro zone, a lower euro/Swiss is very hard to fight," Lignos said.
Investors have been flocking to the safe-haven status of the Swiss franc and shifting out of euros on worries that the euro zone debt crisis will rumble on.
"Our next target for EURCHF is 1.2400," BNP Paribas strategists said. "The CHF is currently driven by capital rather than trade flows and thus remains well supported against the EUR as deposit inflows continue."
The Australian dollar was back at parity against the greenback thanks to optimism about the global economy, which has supported commodity prices.
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