* Euro hits five-month low as Greece worries grind
* Strong China growth offers mixed picture for risk trades
* Aussie holds ground near two-week low as dollar index up
By Kaori Kaneko
TOKYO, Jan 21 (Reuters) - The euro hit a five-month low on
the dollar, ground down by worries about Greece's deteriorating
finances, while the Australian dollar remained on the defensive
after strong Chinese data raised the risk of tightening there.
Market players have been paying close attention to China this
week, due to fears that Beijing will step in to tighten credit
and rein in its rapidly expanding economy.
Investors have been therefore selling currencies leveraged to
growth, such as the Australian <AUD=D4>, New Zealand <NZD=D4> and
Canadian dollars <CAD=>.
Data on Thursday showed China's annual gross domestic product
growth quickened in the fourth quarter and inflation accelerated
in December, with analysts saying it was only a matter of time
before Beijing took more policy steps. []
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"Gradually tightening to prevent bubbles will be positive for
the economy medium- to longer-term," said Jun Kato, senior chief
analyst at Shinkin Central Bank Research Institute.
"But since major economies in the world are still struggling
over the timing of their exit strategies, speculation about
China tightening would raise worries about the impact on the
world economy (in the) short term," he said.
The dollar index <.DXY> hit its highest since early September
after the data, and the yen, which had gained on Wednesday, gave
back some ground.
The euro has fallen steeply this week on fears about Greece's
fiscal problems, also dropped directly after the data, hitting
$1.4067 <EUR=> on trading platform EBS, its lowest since
mid-August.
It pulled back to $1.4097 but was still down 0.1 percent on
the day after shedding 1.3 percent on Wednesday.
Traders said the currency market has been wobbly since China
increased banks' required reserves last week, but they said the
concern should calm down once players judge China's growth is not
likely to derail.
"What China is trying to do by taking tightening steps is to
maintain control of a fast-growing economy. People may be
inclined to adjust their positions in risky assets but not
reverse them because of it," a trader for a U.S. bank in Tokyo
said.
China is Australia's top trading partner, making the Aussie
sensitive to growth expectations for China.
The Aussie <AUD=D4> edged up 0.3 percent on the day to
$0.9131 after fluctuating following the data release. It shed
nearly 1.8 percent on Wednesday as high-yielding currencies were
sold on worries about what steps the Asian giant would take.
It rose 0.7 percent against the yen to 83.59 yen <AUDJPY=R>
after falling 1.6 percent the day before.
"A lot of talk since last night about strong China GDP meant
the Aussie had been sold enough by the time the data came," the
trader said.
The New Zealand dollar <NZD=D4> however slipped 0.2 percent
to $0.7207 <NZD=D4>, shedding earlier gains made after better
than expected retail sales data. [].
The U.S. dollar rose 0.4 percent to 91.58 yen <JPY=>
following Tuesday's bullish reversal from support in the 90.35
yen area. Still, traders say, a break above 92.00/05 is necessary
to improve its tone.
The euro also made up ground against the yen, inching up from
near a one-month low to 129.08 yen <EURJPY=>. It lost more than
1.2 percent on Wednesday, with critical support around the
128/127 yen zone.
Against sterling, the euro edged up 0.1 percent to 86.64
pence <EURGBP=D4> after falling to 86.50 pence on Wednesday, its
lowest since last August.
Attention was shifting to U.S. economic data and earning
reports later Thursday with the first-time claims for jobless
benefits for the latest week and business activity data for
January slated. <ECONUS>
Companies such as Goldman Sachs <GS.N> and Google <GOOG.0>
are scheduled to release quarterly earnings. []
(Additional reporting by Anirban Nag in Sydney and Satomi
Noguchi in Tokyo; Editing by David Dolan)
