FOREX-Euro trims gains, awaits details of Greece rescue
* Euro trims some of the previous day's gains
* Reports of an EU bailout for Greece lifts risk sentiment
* Details and impact on Spain and Portugal watched
* Eyes on Bernanke's testimony at 1500 GMT
By Satomi Noguchi
TOKYO, Feb 10 - The euro fell on Wednesday, trimming some of the previous day's gains, with investors awaiting details of a rescue package for Greece, keen to see how it could impact the euro zone economy.
The euro was handed a reprieve on Tuesday after a senior German ruling coalition source told Reuters that euro zone governments had decided in principle to help Greece, prompting investors to unwind short positions in the single currency. [ID:nSGE61801C]
Various options were under consideration and no final decision had been taken but the most likely possibility was to offer "bilateral help", the source said.
Some traders said that while there has been initial short covering in the euro, heavy moves in the single currency suggest the market is not fully convinced about a possible bailout for Greece.
"If the market was really no longer concerned about Greece, then the euro would have gained much more than that," said Nobuhiko Akai, senior manager of forex trading group at Bank of Tokyo-Mitsubishi UFJ.
Concerns about Greece's public finances and potential contagion effects have hit the euro and soured risk appetite in recent weeks. European Union leaders will hold a special summit on the European economy on Thursday and speculation is swirling that a package will be hammered out soon for Greece.
Some market players questioned the wisdom of buying up the euro at this stage, as aid for Greece could lead to similar measures for the other struggling euro zone economies like Spain and Portugal.
"This still means a burden to the region and possibly put a constraint on the ECB's monetary policy and pace of withdrawal of liquidity injection," said a trader at a European bank in Hong Kong. "Fundamentally, Europe will likely remain a lagged, underperforming the U.S."
The euro <EUR=> fell 0.2 percent to $1.3765, after having jumped nearly 1 percent on Tuesday, its best daily performance in more than two months. Near-term resistance for the euro is seen at around $1.3850, its Feb. 1 low.
The euro edged 0.1 percent lower to 123.58 yen <EURJPY=R> from late on Tuesday when it gained over 1.3 percent.
Both the U.S. dollar and yen <JPY=> have been the main gainers since late last month on increasing worries that the pace of global growth will slow and that problems plaguing Greece may spread to Spain and Portugal.
As a result, speculators built record short euro positions and went long on the U.S. dollar and the yen.
Traders said the euro's recent bounce is leading to some unwinding of these positions, pushing down the dollar <.DXY> and yen.
"As Europe moves closer to ring-fencing Greece, bear market hedges make less sense," strategists from JP Morgan said in a note.
"If European governments deliver on reports of bilateral assistance to Greece, and if Europe imposes conditionality akin to an International Monetary Fund programme, then the euro/dollar will have seen a near-term bottom."
The dollar rose 0.1 percent against the yen <JPY=> to 89.83 yen from late on Tuesday when it rose nearly 0.4 percent.
The market is also keenly watching Fed Chairman Ben Bernanke who is expected on Wednesday to outline the Fed's strategy for tightening. The prepared testimony will be released at 1500 GMT, even though the congressional hearing has been postponed. [ID:nFEDAHEAD].
Meanwhile, the Australian dollar slipped 0.3 percent to $0.8765 <AUD=D4>, after a jump over 1.5 percent on Tuesday. (Additional reporting by Anirban Nag in Sydney and Charlotte Cooper in Tokyo; Editing by Edwina Gibbs)