On Tuesday, the single currency euro held its ground early in Asia, having been squeezed higher overnight as the market pared extremely bearish bets against it ahead of key events in Europe this week.

After bouncing off a 6-month trough at $1.2666, the euro stood at $1.2767 and traders said buying ahead of a $1.2650 option barrier had prompted some short covering. The euro was also nearing strong support seen just below $1.2600.

After a holiday on Monday, trading activity in Asia is likely to pick up as Tokyo reopens and investors will also have the December trade figures of China to chew on. The Chinese report is expected to show export growth slowing to 13.5 percent, the weakest in two years.

The short covering of Monday helped the euro rise against other currencies; the single currency popped above 98.00 yen from an 11-year trough of 97.28 yen and stood at A$1.2467, off a record low around A$1.2408 set last Friday.