Forex - EUR/JPY edges higher, E.Z. talks in focus

Forexpros - The euro edged higher against the yen on Tuesday, as market sentiment found mild support ahead of a key meeting between German Chancellor Angela Merkel and International Monetary Fund President Christine Lagarde to discuss Greece's bailout.

EUR/JPY hit 98.46 during European afternoon trade, the pair's highest since January 6; the pair subsequently consolidated at 98.26, adding 0.17%.

The pair was likely to find support at 97.26, the low of January 9 and an eleven-year low and resistance at 99.34, the high of January 5.

Following talks on Monday with French President Nicolas Sarkozy, Merkel warned Greece that it would not be possible to give further financial aid without swift progress on its second rescue package, including a voluntary write-down on Greek debt held by private creditors.

The euro found support earlier after ratings agency Fitch said that France, the euro zone's second largest economy, would not be downgraded in 2012.

But the single currency remained under pressure as borrowing costs for Italy and Spain remained elevated, with the yield on 10-year Italian government bonds lodged above the 7% threshold seen as unsustainable at 7.15%, while the yield on Spanish 10-year bonds was at 5.57%.

Markets were also jittery after a report showed that overnight deposits at the European Central Bank on Tuesday hit a fresh record of EUR481.935 billion, indicating that banks in the region remain unwilling to lend to each other.

Elsewhere, the yen was fractionally lower against the U.S. dollar with USD/JPY inching up 0.01%, to hit 76.85.

Also Tuesday, the Bank of Japan supplied USD12.556 billion to banks, the most it has ever supplied since reinstating its dollar-funding operation in 2010, signaling persistent concerns over the euro zone's debt woes.



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