* German industrial orders data pushes euro higher
* Investors flock to Portugal bond sale
* Safe-haven demand buoys yen vs dollar and euro
* Australian dollar drops after RBA cuts cash rate
By Julie Haviv
NEW YORK, May 7 (Reuters) - The euro fared well against most
currencies on Tuesday as surprisingly strong German data and a
solid sale of Portuguese bonds allayed euro zone economic and
debt concerns, prompting investors to pare positions against the
Gains in the euro, which is down 0.8 percent against the
dollar so far this year, could prove transitory, however, should
the euro zone continue to languish in a recession that motivates
the European Central Bank to ease monetary policy further after
last week's interest rate cut.
Nevertheless, data showing German industrial orders rose
again in March, confounding expectations for a drop, prompted
investors to curb euro short positions.
"The data offered a hopeful sign for recovery, which lent
mild support to the euro," said Joe Manimbo, senior market
analyst at Western Union Business Solutions in Washington.
"Still, the general outlook for the region is decidedly
less auspicious, particularly after ECB President (Mario) Draghi
on Monday again stated that bank officials were on data watch
and persistent weakness in the core would offer scope for
another rate cut."
Investors, meanwhile, on Tuesday flocked to buy Portugal's
first 10-year bond in more than two years, putting the country
on course to exit its bailout on time and qualify for an ECB
debt support program.
Portugal's preparations to issue a new benchmark 10-year
bond are an "enormous success," European Central Bank
policymaker Yves Mersch said on Tuesday.
The euro hit a session high of $1.3131 after the
German data and was last trading up 0.1 percent at $1.3084.
Euro gains were more pronounced against European currencies,
namely the Swiss franc and British pound.
But Camilla Sutton, chief currency strategist at Scotiabank
in Toronto, believes the euro is better supported than the
dollar in the near term because the ECB is not engaged in the
type of aggressive monetary stimulus the Federal Reserve has
"The truth is relative monetary policy still favors the ECB
in terms of currency strength," Sutton said. "As long as the ECB
is not engaged in any balance sheet expansion, that's
currency-positive and even if there's a risk of lower rates, the
interest rate differential between the euro and the dollar is so
close, it's not even material."
She thinks the euro could hold that $1.30 level over the
next few weeks.
In the options market, one-month implied volatilities
were near their lowest since January, indicating the
euro was likely to stay in a range against the dollar. The euro
has been trading between $1.2740 and $1.3243 since March.
Support for the euro is seen around $1.3024, the 76.4
percent retracement of its April 24-May 1 rally, and the 55-day
moving average at $1.3021. Traders also cited bids from Asian
sovereign accounts at sub-$1.3050 levels.
The yen, meanwhile, rose against the dollar and euro.
Concerns about political tensions surrounding Iran and Syria
prompted investors to seek the yen's safety, analysts said.
The yen is viewed as a safe haven because it is a highly
liquid currency. In times of crisis, Japanese investors tend to
bring home their savings invested in overseas assets.
The dollar fell 0.4 percent against the Japanese currency
at 98.98 yen, while the euro was down 0.3 percent at
The Reserve Bank of Australia surprised the market earlier
in the global session by cutting interest rates to a record low
of 2.75 percent, pushing the Australian dollar to a two-month
low of US$1.0152.
The market had been divided on the chances of a cut. The
growth-linked Aussie dollar was last at US$1.0172, down
0.8 percent on the day.
Sebastien Galy, foreign exchange strategist at Societe
Generale in New York, said the Aussie's rebound from key support
at $1.0150 was noteworthy.
RBA Governor Glenn Stevens said the Aussie dollar "has been
little changed at a historically high level over the past 18
months, which is unusual given the decline in export prices and
interest rates during that time."
Boris Schlossberg, managing director of FX Strategy at BK
Asset Management in New York, said Stevens' remarks were a
"clear signal by the central bank that it would like to see the
(AUD/USD) pair trade lower - at least below parity - in order to
rebalance the economy and stimulate the export sector."