Categorized | Forex

FOREX-Euro buoyant, Aussie dollar eyes jobs data

FOREX-Euro buoyant, Aussie dollar eyes jobs data

* Spanish bond auction, Bernanke’s testimony in focus

* Euro hovers near two-week highs, Aussie not far off parity

* Australian jobs data in focus

By Ian Chua

SYDNEY, June 7 (Reuters) – The euro hovered near two-week highs against the greenback early in Asia on Thursday, while the Australian dollar rose towards parity as hopes grew that Europe was moving closer to helping rescue Spain’s stricken banks.

Speculation of more stimulus from the U.S. central bank also helped bolster risk appetite. A top Fed official said a softening U.S. economy is getting close to a point where he would call for more stimulus action from the Fed to revive growth.

As a result, both the safe-haven U.S. dollar and yen fell sharply. The dollar dropped to its lowest since late May against a basket of major currencies. That saw the euro climb as high as $1.2585 overnight.

The single currency last stood at $1.2568, with immediate resistance around $1.2600, followed by $1.2671, a level representing the 38.2 percent retracement of its May 1-June 1 fall.

Also helping sentiment, European Central Bank Governing Council member Ewald Nowotny told Austrian television any Spanish request to tap European bailout funds would be a “reasonable option” that could help restore trust in the country’s banking sector.

Still, analysts warned that markets will remain choppy, with risk assets vulnerable to further falls.

“Market expectations for a new wave of quantitative easing in the major developed market economies have increased, but this might not tackle the cause of the current challenges or, indeed, allay market anxieties related to banking and sovereign solvency,” said Koon Chow, strategist at Barclays Capital.

“Until these problems are tackled head on, it will be hard for emerging market assets to rally independently.”

In the short-term, traders said further gains in the euro will depend on Spain’s bond auction due later in the day. The sale of up to 2 billion euros of bonds is seen as a crucial test of Madrid’s ability to tap the bond market.

It comes at a time when Spain’s debt costs are at their highest since the launch of the euro and plans to recapitalise its banks are being actively discussed with German and European Union officials.

The ECB’s decision to do nothing on the monetary policy front after its meeting on Wednesday has put the onus squarely on euro zone governments to solve the bloc’s debt crisis.

Also in focus is Federal Reserve Chairman Ben Bernanke’s testimony on the economic outlook before the congressional Joint Economic Committee at 1400 GMT. Markets will be combing through his comments for hints of any new stimulus.

The U.S. dollar also fell against many other currencies, including the Australian dollar, which jumped above $0.9900 , pulling well away from an eight-month trough of $0.9581 plumbed Friday.

The Aussie was already on fire after surprisingly strong first-quarter growth data on Wednesday dampened market expectations for deeper interest rate cuts.

The market’s immediate focus is Australia’s employment data due at 0130 GMT. Forecasts centre on a fall of 5,000 jobs in April and for the unemployment rate to edge up to 5.1 percent from 4.9 percent.

The U.S. dollar managed to outperform the yen, which was hit broadly as risk appetite improved. The yen was also dampened by recent threats from Japanese authorities to curb its strength.

The dollar climbed to a one-week high of 79.39 yen, putting even more distance from a 3-1/2 month trough around 77.65 set on June 1.

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